IDP Education (ASX:IEL) share price tumbles after record result falls short of expectations

Sometimes not even record results are enough…

| More on:
A male executive worker wearing glasses and a blue collared shirt looks at his laptop screen with a concerned look on his face and his hand to his forehead as he watches his screen.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • IDP has delivered a record half year result
  • A rebound in demand and a key acquisition helped drive the strong result
  • However, as strong as it was, some analysts were expecting even more from IDP

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."

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.

More on Share Market News

Green stock market graph.
Share Gainers

Here are the top 10 ASX 200 shares today

It was one for the history books today.

Read more »

Person holding a blue chip.
Blue Chip Shares

4 ASX 200 blue-chip shares to hold but not buy: experts

These blue-chips are worth holding if you already own them, but are too expensive for new investors to buy.

Read more »

A bricklayer peeps over the top of a brick wall he is laying with a level measuring tool on top.
Broker Notes

Are Brickworks shares a buy, hold or sell ahead of earnings season?

Brokers have been weighing property gains, US headwinds, and merger impacts to form a view.

Read more »

A man in his office leans back in his chair with his hands behind his head looking out his window at the city, sitting back and relaxed, confident in his ASX share investments for the long term.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Green stock market graph with a rising arrow symbolising a rising share price.
Record Highs

The ASX 200 just hit a new record high. Here's why.

The prospect of lower interest rates is pushing the market into new territory.

Read more »

Three guys in shirts and ties give the thumbs down.
Share Fallers

Why Appen, Emerald Resources, IGO, and Strike Energy shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why Boss Energy, DroneShield, Pilbara Minerals, and Polynovo shares are charging higher today

These shares are having a good time on hump day. But why?

Read more »

Interest rate written in white with an increasing pile of coins.
Share Market News

ASX 200 lifts off as inflation data spurs hope for RBA interest rate cuts

ASX 200 investors are celebrating the latest inflation reading. But why?

Read more »