The IDP Education Ltd (ASX: IEL) share price is falling on Wednesday morning following the release of its half year results.
At the time of writing, the language testing and student placement company’s shares are down 3% to $30.62.
IDP Education share price falls despite record revenue
- Revenue up 47% to a record of $397 million
- IELTS volumes grew 79%
- Earnings before interest and tax (EBIT) rose 61% to $77.9 million
- Adjusted EBIT up 64% to $80.7 million
- Adjusted net profit after tax jumps 70% to $52.9 million
What happened during the first half?
For the six months ended 31 December, IDP Education was well and truly back on form after significant disruption during the height of the pandemic. It reported a 47% increase in revenue to a record of $397 million.
This was driven by the acquisition of the British Council’s Indian IELTS operations and strong demand for its language testing services, which led to the key English Language Testing business reporting a 62% increase in revenue to $256.7 million.
Also performing positively were its Student Placement business, which reported a 33% lift in revenue to $106.2 million, and its Digital Marketing and Events business, which delivered a 15% increase in revenue to $23.8 million.
In respect to Student Placement revenue, this growth was driven entirely by its Multi-Destination operations, which offset weaker revenues in its Australian operations. Positively, though, management notes there have been early signs of a rebound in interest in Australia, which has coincided with the relaxation of border restrictions and an extension of post-study work rights.
One slight disappointment, which could be holding back the IDP Education share price today, was that the company’s costs grew a touch quicker than its revenue. Direct costs were up 59% to $177.7 million and overhead costs rose 36% to $122 million. This led to the company’s EBITDA rising 43% to $96.6 million.
Finally, on the bottom line, IDP Education reported an adjusted net profit after tax of $52.9 million, which was up 70% over the prior corresponding period.
Overall, this result has fallen a little short of what analysts at Morgans were expecting, which could explain some of the weakness in the IDP Education share price. Morgans was expecting “a strong ‘post’-Covid earnings rebound: revenue +55% on pcp and NPATA ~+90% to A$57.5m.”
Management commentary
IDP’s Chief Executive Officer and Managing Director, Andrew Barkla, was very pleased with the half. He notes that IDP’s strength of business model, impactful innovation, and an attractive policy landscape had delivered a strong rebound in its results.
Mr Barkla said: “Our growth has accelerated, with strong volume increases in IELTS and Northern Hemisphere study destinations, which is evidence of the momentum we have built over the past six months. Crucially, our ongoing program of innovation reinforces IDP’s industry leadership position. Our unique combination of digital and physical solutions is underpinning our competitive advantage in a growing industry with supportive regulatory and policy settings.”
And while no guidance was provided for the second half, the CEO is positive on the company’s long term outlook.
He concluded: “We have invested for long-term growth and are seeing the benefits of this through increased demand for our services. Our unique digital platforms and trusted human connections will ensure our people, customers and institutions benefit from even stronger support.”
The post IDP Education (ASX:IEL) share price falls after record result falls short of expectations appeared first on The Motley Fool Australia.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Idp Education Pty Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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