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48.0¢ schrole group ltd

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Thorium1

164 Posts.

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04/06/21

11:02

Post #: 53645348
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Originally posted by Transversal: ↑

With regard to the possibility of ISS launching their own product to compete with Schrole, I would personally take the following points into considerations:

1) As a not-for-profit organisation, ISS may simply not have the internal resources necessary to develop a new software platform; and, had they wanted to build that sort of capability, they probably wouldn’t have chosen to partner with Schrole in the first place.

2) Under the terms of the agreement between ISS and Schrole, it was specified that Schrole would own 100% of the IP associated with the Advantage platform (see ASX announcement on 05 Apr 2018); thus, the chances of ISS offering an essentially equivalent product should be low.

3) In any event, the current agreement will only expire on 30 June 2022 (i.e. not this year), even though from 01 Jul 2021 Schrole will no longer have to share revenue with ISS on new sales.

4) The main drivers behind the early termination of the agreement with ISS, were a) the fact that the effective revenue recovery rate for Schrole under the terms of the agreement was consider too low, and b) the fact that the new relationship with Faria seemed to offer much better prospects in terms of scale and margins. These points were clearly made in the ASX announcement on 08 Jul 2020.

So, it would appear to me that the termination was almost entirely Schrole’s decision, motivated by the pursuit of better economics; while there may be nothing to prevent ISS from developing their own product, their effective readiness to do so is not a given.

It has also been explicitly stated (08 Jul 2020) that ISS-Schrole Advantage customers will have the option to continue their relationship with both companies, once the current agreement has expired; therefore, the incentive for ISS to develop a competing product may not be material.

Anyway, even if ISS did launch a competing platform, thereby creating some churn after June 2022, such churn will be offset by the new sales under the agreement between Schrole and Faria, which will be effective from July this year.

Just my two cents.

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From ISS website:

On June 30, 2021, the alliance between ISS and Schrole will end and ISS-Schrole Advantage will be replaced. Starting on July 1, 2021, there will be two new recruiting systems, each independently provided by International Schools Services (ISS) and Schrole Group.

In addition to this, I note that Greg Smith (original co founder of Schrole) is Vice President of Asia Pacific.

It would be very odd (even though they are not for profit) for an organisation to hand over all of their clients when they previously had a revenue split. I suspect if Faria don't start signing up schools, the schools numbers will drop begin to decrease. Bare in mind the majority of schools came in via the Schrole/ISS deal and basically haven't really increased since. Schrole have increased revenue by renegotiating the deal and signing up customers to more expensive options. It will be interesting to see where they end up if ISS have a decent option which is cheaper.

SCL Price at posting: 1.2¢ Sentiment: Sell Disclosure: Not Held
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