The S&P/ASX 200 Index (ASX: XJO) has started the month in fine form and is storming notably higher on Wednesday afternoon.
Unfortunately, missing out on the improving investor sentiment is the IDP Education Ltd (ASX: IEL) share price.
The language testing and student placement company's shares have been in a trading halt since March 26. It requested the halt last week while it assessed the impact of the COVID-19 crisis on its business.
This afternoon the company's shares came a step closer to returning to trade, following the release of an update and the announcement of an equity raising.
What did IDP Education announce?
This afternoon the company's chief executive officer and managing director, Andrew Barkla, revealed that COVID-19 is having a material impact on its business. This includes the suspension of many of its testing centres around the globe.
Barkla commented: "COVID-19 is having a material impact on IDP and other organisations globally, however IDP is taking decisive action to ensure we have sufficient liquidity to trade through the current situation. With a focus on preserving our global talent, these measures position us to take advantage of the substantial pent-up demand we expect to see when global travel and gathering restrictions begin to relax."
How has IDP Education been impacted?
According to the release, at the end of February its IELTS volumes were up 11% on the prior corresponding period to 949,000.
Furthermore, student placement volumes were up 27% to approximately 41,000 and overall revenue had increased 22% to $480 million.
However, since then, its performance has been impacted greatly by testing centre suspensions, travel bans and restrictions, and a 21-day lockdown in India. The latter is a big blow, given that it is the company's biggest testing country.
What action is IDP Education taking?
The company advised that it is launching an equity raising, increasing its debt facilities, and undertaking several operational initiatives. This includes both board and senior management pay cuts.
It is doing this to ensure that the company is well-placed post COVID-19 to take advantage of its substantial market opportunity.
IDP Education is undertaking a fully underwritten institutional placement to raise approximately $175 million at $10.65 per share. This represents a 7.9% discount to its last trade price of $11.56. Macquarie Group Ltd (ASX: MQG) has underwritten the placement.
After which, the company intends to offer existing eligible shareholders the opportunity to participate in a non-underwritten share purchase plan. This is expected to raise up to $15 million.
IDP Education's shares are expected to return to trade on Thursday.
