UAE school fees freeze a “credit negative” for education group GEMS

School operator GEMS has been hit hard by a UAE fee freeze. (AN)

DUBAI: A decision to freeze school fees in Dubai and Abu Dhabi for the 2021/22 academic year will limit the ability of education company GEMS to boost revenues, said Moody’s.
While this impact was largely anticipated it nonetheless creates “a degree of uncertainty regarding GEMS’ ability to increase tuition fees consistently in the future, which may further slow down its deleveraging trajectory,” the credit ratings agency said.
Some private schools in the region have reduced fees to ease the financial burden on families that may be struggling, but the situation has put increasing pressure on the industry’s own financial footing. At the same time the departure of expatriates from the region which predated the pandemic, has also weakened the outlook for the sector.
“We estimate that GEMS generates around three quarters of its revenue in Dubai and Abu Dhabi.To offset these restrictions, GEMS will implement cost control measures that include capping staff wage inflation and reducing discretionary capital spending,” Moody’s said.
Still, with increased uncertainty likely to raise questions over the viability of new school projects, GEMS may eventually emerge more strongly from a recovery, given its spare capacity of around 20,000 desks in the UAE and Qatar.