The IDP Education Ltd (ASX: IEL) share price is down around 45% after giving the market an update.
This business is best known for providing student placement services and English language testing.
Trading update
The company said its key destination markets continue to be impacted by policy uncertainty, which is negatively impacting the size of the international student market globally.
In the UK, there is heightened uncertainty following the release of the immigration policy white paper. with further restrictions expected on student immigration.
In Australia and Canada, restrictive policies remain after the elections, with further policy changes pending. Student demand in Canada continues to “decline sharply” because of ongoing policy volatility.
In the US, the international student environment is “increasingly negative”.
IDP Education said its student enrolment pipeline size is being impacted, as well as conversion rates in the important months of May and June.
Financial guidance
In FY25, the company’s student placement volumes are now expected to decrease by around 28% to 30% and its language testing volumes are now expected to decrease by between 18% to 20% compared to FY24. IDP said the impact on revenue will be partially mitigated by continued strong average fee growth.
The ASX share now estimates that adjusted FY25 EBIT (EBIT explained) for FY25 will be between $115 million to $125 million. Profit generation is a key factor for the IDP Education share price.
It continues to work on cost control initiatives since the half-year, with adjusted overhead costs for the second half of FY25 now expected to be approximately 5% lower than the second half of FY24, despite its negative operative leverage.
Policy uncertainty is expected to continue into FY25, as well as the expected impact of FY25 enrolment pipeline on FY26 volumes.
What are the positives for IDP Education shares?
The company revealed it’s working on a detailed review of longer-term cost, productivity, investment and commercial levers. An update on this work will be provided at the FY25 result.
The company said it remains confident in the long-term growth drivers for the industry and is well-placed to navigate the current challenging market conditions.
It noted it’s the market leader and expenses to grow market share. It’s going to focus on investment in quality and innovation to ensure IDP is well-placed to grow its market share and position it for when market conditions improve.
IDP also pointed out that it has a robust balance sheet with a strong cash position.
Time will tell whether market conditions improve enough for investors to regain confidence.
