The IDP Education Ltd (ASX: IEL) share price is flying today as the market responds to the company’s first-half results.
IDP is an education organisation that operates internationally, offering student placements in Australia, New Zealand, the US, UK, Ireland and Canada. This involves assistance for students to choose and find courses, find suitable health cover and complete visa applications.
IDP is also a co-owner of the IELTS, the world’s most popular high stakes English language test.
Tough first half but recovery underway
Naturally, IDP felt the brunt of the pandemic as international travel ground to a halt.
Student placement volumes decreased by 37% to 21,200, with Australia the major detractor on the back of the hard border closures. However, UK volumes (down 12%) were more resilient, reflecting open borders and market share gains.
English language testing volumes rebounded from lows in April and May 2020, recording a 49% increase compared to 2H20. But compared to the prior corresponding period (pcp) of 1H20, volumes were down by 26% to 540,300.
This translated to a 29% drop in revenue to $269 million, while EBIT nearly halved to $47.3 million.
Despite the drop off in revenue and earnings, chief executive Andrew Barkla said the results demonstrate IDP’s resilience, pointing to the company’s diverse business model and long-term strategy.
The business remains profitable on the bottom line, reporting net profit after tax (NPAT) of $29.7 million, down 45% on a constant-currency basis compared to the pcp.
After raising capital last year, IDP finished the half with $292.8 million cash on its balance sheet against $59.3 million of debt, putting the company in a strong position to continue weathering the COVID storm.
Dividend halved
IDP declared an unfranked interim dividend of 8 cents per share, representing a payout ratio of roughly 75% of NPAT.
This compares to the deferred 16.5 cent interim dividend declared in 1H20, and puts IDP Education shares on an annualised dividend yield of roughly 0.6%.
Now what?
Looking ahead, Mr Barkla said the company enters the second half well-positioned internationally as an industry leader, with further investment planned in student placement, data science and IELTS.
“When comparing our H2 FY20 and H1 FY21 results, it is encouraging to see IDP’s recovery is already underway,” he said.
My Barkla concluded by saying, “With our global teams in place, a supported pipeline of students, and increased digital capabilities, we are beginning to capture the demand as our customers reignite their global travel and study ambitions.”
With today’s sharp 10% rise at the time of writing, the IDP Education share price is actually sitting higher than pre-pandemic levels. The company has an impressive long-term track record but with the near-term bound to be rocky, I’m happy to watch on from the sidelines.
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