Branch closings dim Nova’s future

English-conversation school operator Nova Corp.’s planned closure of about 50 branches at the end of this month is indicative of the severe business climate the company faces, following a number of student contract cancellations and an order from the government in June to partially suspend its operations.

The firm, the largest of its kind in the nation, has delayed paying some foreign teachers’ salaries.

Nova plans to reduce costs by cutting personnel after the branch closures are completed. However, Nova’s prospects remain uncertain.

According to the company, Nova had 418,000 students as of March 31, a more than 10 percent drop from the same time last year, due to former students filing a series of high-profile suits demanding the firm refund their tuition fees after they canceled lesson contracts.

Nova has also been hampered by a decline in the number of new students, following the Economy, Trade and Industry Ministry’s order in June to partially suspend its operations.

Nova listed revenues of 9.2 billion from April to June in fiscal 2007, a 31.9 percent drop from the same period last year. The firm had an after-tax deficit during the same period of 2.4 billion.

The firm’s delay in salary payments to some foreign teachers has caused a great deal of anxiety. “I’m worried about what’s going on,” a foreign Nova teacher in Osaka said.

The [Osaka-based] General Union, a labor union for Japanese and foreign workers, includes Nova teachers among its members [and is a NUGW sister union of Tokyo Nambu]. On behalf of the teachers, the union submitted a request to Nova Corp. President Nozomu Sahashi on Thursday demanding prompt salary payment for the teachers.

The union also asked Nova to return tuition fees to people who have canceled their contracts with the firm, and to give sufficient advance notice when it decides to close a school.

A union official said the union would consider taking legal action against Nova if the situation does not improve.

The Sydney Morning Herald, a major Australian paper, recently carried a story about Nova headlined “Teachers unpaid as company falters.”

According to the article, Australians account for 5,000 of the nearly 7,000 foreign teachers who work for Nova.

The firm was initially scheduled to pay instructors’ salaries on Sept. 14, but the salaries of some teachers were actually paid after Tuesday.

According to sources close to a financial institution, Nova is believed to be closing branches in prime urban locations to reduce tenant and personnel fees, as well as to secure large deposits to cover its daily operations.

After the ministry’s suspension order, Sahashi said Nova would seek a capital and business tie-up with another firm in order to strengthen its financial base. But Nova has not yet partnered with another company.

Observers believe Nova’s financial condition will not improve unless it takes drastic measures.

http://www.yomiuri.co.jp/dy/national/20070922TDY02008.htm

shares