Enrollment Slump, Rising Costs Drag on CEU’s Profit

Tuition increases kept revenue afloat, but fewer students and a surge in administrative expenses squeezed margins.

Centro Escolar University reported a sharp decline in annual profit as falling enrollment and rising operating costs overwhelmed the benefit of higher tuition rates, exposing the pressure facing private schools as households grow more cautious about education spending.

The university’s consolidated net income fell 20% to ₱548.1 million for the fiscal year ended May 31, 2026, from ₱685.7 million a year earlier. Earnings per share declined to ₱1.22 from ₱1.53. Revenue, by contrast, edged up just 0.4% to ₱2.45 billion, leaving the university with little room to absorb a broad increase in expenses.

The results reflect an uncomfortable equation for the century-old institution: CEU charged more but taught fewer students.

Enrollment fell 4.5% to 18,254 students in the 2025-2026 school year, reversing the growth recorded during the previous three academic years. The university’s largest campus, Manila, lost 802 students, or 6.2%, while enrollment in Makati declined 4.4%. Malolos was the exception, posting a 3.4% increase to 2,754 students. The university attributed the overall decline primarily to global and domestic economic pressures.

A 3% increase in tuition and other school fees helped cushion the impact. Tuition and school-fee revenue rose 0.5% to ₱2.39 billion, even as the number of students declined. But the increase was driven by higher other fees and income from school services. Tuition revenue alone slipped to ₱1.03 billion from ₱1.04 billion.

That distinction matters. Price increases can preserve revenue when enrollment weakens, but they have limited power to protect profit when inflation and campus expenses are rising at the same time. Philippine rules also require private higher-education institutions to allocate 70% of incremental tuition proceeds to salaries, wages, allowances, and employee benefits, limiting how much of a tuition increase can fall to the bottom line.

Costs Outrun Revenue

CEU’s total costs and expenses climbed 7.8% to ₱1.88 billion, far outpacing the increase in revenue.

Costs of educational services rose 2.8% to ₱1.55 billion. Salaries and wages increased 3% to ₱609.4 million, while light and water expenses climbed 14% to ₱141.1 million. Spending also increased for academic development, co-curricular activities, stationery, affiliations, and laboratories as the university continued operating its campuses and improving facilities after the pandemic-era disruption.

The sharper pressure came from general and administrative expenses, which surged 40% to ₱330.4 million.

Repairs and maintenance rose 55% to ₱95.7 million. Janitorial and security expenses increased 37% to ₱86.5 million, and advertising expenses more than doubled to ₱18 million. Clinical expenses, taxes and licenses, membership fees, and other administrative costs also increased.

The jump in advertising is particularly notable against the decline in enrollment. The university spent more to support recruitment and institutional visibility but still recorded fewer students in its two major urban markets. That raises the question of whether heavier marketing can offset broader demographic, competitive, and affordability pressures facing private universities.

Operating income before other income and taxes dropped 18% to ₱570.5 million. Net profit margin narrowed to 22.3% from 28.1%, while return on equity fell to 7.8% from 11%.

Lower interest earnings added to the strain. Interest income declined 14% to ₱52.5 million because of lower deposits and placements and softer interest rates. The university’s short-term investments fell to ₱372.9 million from ₱470.7 million.

Unpaid Tuition Adds Another Warning

The enrollment weakness was accompanied by signs of greater difficulty collecting tuition.

Gross tuition-fee receivables rose 12% to ₱444.9 million, even as the number of students declined. The allowance for expected credit losses on tuition receivables increased to ₱185.4 million from ₱152.5 million, while the total annual provision for credit losses climbed 22% to ₱33.4 million.

More than ₱173 million of tuition receivables were over three quarters past due at the end of May. SyCip Gorres Velayo & Co., the university’s independent auditor, identified the adequacy of credit-loss allowances as a key audit matter because the estimate depends heavily on management judgment, historical collection experience, and expectations about economic conditions. The auditor issued an unmodified opinion on the financial statements.

The rising provision doesn’t threaten the institution’s immediate stability, but it points to greater financial stress among students and their families. For a school already losing enrollment, stricter collection could push more students out, while looser terms could increase bad-debt expenses.

Performance Diverges by Campus

The university’s geographic results showed an uneven operating picture.

Mendiola remained CEU’s principal earnings engine, with net income rising to ₱438.7 million from ₱408.3 million despite lower Manila enrollment.

Malolos moved in the opposite direction. Revenue increased nearly 10% to ₱309.6 million as enrollment grew, but expenses jumped to ₱264.7 million from ₱164.1 million. Net income consequently fell to ₱44.9 million from ₱118.6 million.

Makati-Buendia swung to a ₱6.8 million loss from a ₱45.3 million profit, while earnings from Makati-Legaspi fell to ₱72.5 million from ₱107.3 million. The figures suggest that the profit decline wasn’t caused by enrollment alone. Rising campus-level expenses played an equally important role.

Cash Cushion Remains Strong

Despite weaker earnings, CEU remains financially sturdy.

The university ended the year with ₱1.11 billion in cash and ₱372.9 million in short-term investments. Total liabilities declined 6.6% to ₱2.32 billion, while the company reported no long-term debt. Its current ratio improved to 1.22 from 1.17, and its debt-to-equity ratio remained low.

Operating cash flow fell 28% to ₱682 million, reflecting weaker earnings and a ₱38.6 million increase in tuition and other receivables. Still, operating cash flow exceeded net income, indicating reported profit remained backed by cash generation.

Shareholders will receive less of that cash. The university cut its annual dividend to ₱1 a share from ₱1.40, reducing the payout to ₱446.9 million. It nevertheless distributed roughly 82% of earnings attributable to university shareholders, preserving its standing as a high-payout stock while retaining more funds for operations and expansion.

In July, after the fiscal year closed, CEU agreed to buy land adjacent to its Malolos campus for ₱532.7 million. The acquisition points to management’s confidence in Malolos, the only major campus to report enrollment growth, though it also comes as that campus faces sharply higher expenses and weaker profitability.

For CEU, the immediate challenge is no longer reopening or rebuilding after the pandemic. It is converting tuition increases into sustainable earnings in an environment where students are becoming harder to attract and more difficult to collect from.

The balance sheet gives the university time. The next test is whether management can use it to restore enrollment without allowing the cost of doing so to consume the gains.

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Disclaimer: This is for informational purposes and is not investment advice. Figures come from company disclosures and exchange data; valuation ratios reflect the author’s calculations based on cited inputs.