Recapitalisation plan to save the company now at an advanced stage of implementation

Durrant Pate/Contributor

E-learning company EduFocal is currently being weighed down by heavy debts, with its current liabilities far exceeding its current assets.

The latest audited financial statements for the half year ended June 30, 2026 show current liabilities of $214.4 million exceeding current assets of $45.5 million. This reflects almost a 5:1 liabilities/assets ratio. 

Finance costs of $7.0 million exceeded operating profit of $2.8 million, with the quarter closing with a net loss of $4.3 million. For the half-year, the net loss was $4.0 million, up from $0.8 million in 2025. Shareholders’ equity was a deficit of $166.9 million. 

Management is not comfortable with this position but assures shareholders that the company continues to operate with support from its lenders and creditors. To address this debt problem, Edu-Focal’s Board has approved a recapitalisation plan designed to tackle it directly. 

The recapitalisation has two main parts, the first of which is a land-for-shares transaction, under which the company will acquire land assets in exchange for newly issued shares. 

Navigating out of hostile waters

This transaction is at an advanced stage with attorneys for all parties reviewing final documents, and with execution set for the fourth quarter of 2026, subject to final documentation and regulatory approvals. The second part is a restructuring of the company’s debt, including the conversion of a portion of its liabilities into equity.  

Reducing the debt burden reduces the interest cost that has absorbed operating profit, which is exactly the problem the first half-year results illustrate, where the operating business earns money, but the balance sheet costs money. 

According to the management, “in the first half, EBITDA covered roughly three quarters of our finance costs, and the gap between the two is almost entirely the cost of legacy debt. That is why the recapitalisation described in this report is the most important work in front of us, and why we believe it opens the path back to sustained net profitability.” 

The management is expecting the second half to benefit from the new school year and from the growth in our recurring revenue base, in line with the company’s current objective of converting operating profitability into sustained net profitability. 

More than commendable EBITA

EduFocal has delivered a more than commendable half-year performance, generating EBITA of $9.8 million, the same it did for the entire 2025. As such, EduFocal’s EBITA of $9.8 million for the half-year ended June 30, 2026 was achieved in half the time compared to 2025 on a much leaner cost base. 

EBITA is an accounting metric used to show a company’s profitability and to track the earning power of the operating business. The operating business thus far this year was profitable in both quarters of the year. 

In the first quarter, EduFocal recorded a net profit of $0.37 million, turning around a net loss of $1.34 million in the first quarter of 2025. The second quarter was softer, with revenue of $5.3 million, down from $13.2 million a year earlier, and EBITDA was $3.2 million, down from $10.3 million in the prior year. 

The decline reflects the timing of B2B contract billings, which fall unevenly across quarters depending on when client engagements are delivered and invoiced, rather than a loss of clients. 

Financial Position 

Total assets at June 30, 2026 were $200.1 million compared with $203.1 million at December 31, 2025. Intangible assets of $152.2 million represent 76% of total assets. 

Net receivables were $24.0 million, down $1.5 million from year-end as collections continued. Total borrowings were $265.8 million ($152.7 million long-term and $113.1 million current), slightly down from $261.7 million at last year-end.