The company also announced that it has made “substantial progress” on its Optimization Plan,which was put in place in August to benefit the company by $15m, and has already made around $14m in cost savings on an annualised run-net basis.
“Divesting of the agencies allows us to return to our core business of managing schools”
It has also completed a fifth stage closing of its previously announced non-brokered private placement for $50,000, consisting of 5,000 Series A preferred shares, and is in negotiations which could see it to exit forbearance with its senior lender by the end of the year.
KGIC announced the acquisitions of Uhak.com and Kim Okran’s four Korea-based offices in November 2014 and January 2015 respectively – two of South Korea’s biggest education agencies.
However, the company has since concluded that the agencies “did not fit into that model and were a distraction from what we do best”, KGIC’s CEO, Shawn Klerer, told The PIE News.
The company reported $3.1m of consolidated net liabilities and year-to-date losses of $0.83m attributable to Uhak.com, it reported at the end of June this year.
There were also an immaterial amount of consolidated net assets and year-to-date net losses of $0.43m attributable to Kim Okran.
The sale of Uhak.com closed on October 28, followed by the Kim Okran sale on November 6, both to arms-length third parties with the purchaser assuming all net liabilities, inclusive of severance obligations.
The two sales mark KGIC’s complete exit from the ownership of agency operations.
“Divesting of the agencies allows us to return to our core business of managing schools, all of which are located in Canada,” Klerer said.
The company will now return to a focus on education provision, through its 11 career college, language school and high school brands, in line with the Optimization Plan.
“While I would love to turn our attention to expanding the business, for now, any growth will be organic in nature”
Since the plan has been put in place, monthly bookings have risen, and were up 15% in September and October on the first eight months of the year.
“We are extremely satisfied with the progress so far as the cost structure has been dramatically reduced,” Klerer said.
However, the company is not yet at the stage where it might consider any expansion of its schools portfolio.
“The company’s Optimization Plan is intended to return the company to profitability while leveraging KGIC’s size, depth of schools, and infrastructure,” Klerer explained. “While I would love to turn our attention to expanding the business, for now, any growth will be organic in nature.”
“Presently, our focus remains on stabilising and growing the schools currently in our stable,” he added.
KGIC is currently in talks with its senior lender and existing and potential investors that it hopes will end in an agreement to exit forbearance prior to December 31.
“We are encouraged by the various discussions we have underway,” Klerer commented.