Cashing in on the demand for English lessons with IDP Education


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English language testing and international student placement company IDP Education released another strong set of results for the 12 months to June 2018.

IDP focused on longer-term growth by investing heavily. Let's take a closer look at these results and how IDP is set up for expanding the opportunity for long-term growth.

Net profit after tax increased 24% while earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 30% relative to the previous year.

idp education

IDP's investment in service and new test centres is driving share growth, both its share of IELTS tests (relative to the other distributor of the test, the British Council), and within the broader English language testing market.

The company's investment in the development of a computer-based test will benefit it in future years as it lowers costs, increases testing capacity within existing test centres and improves the test taker's experience with far shorter result turnaround times.

Importantly, the new product will potentially neutralise the current point of difference offered by rival test PTS. This positions the business for continued strong growth and improving free cash flow generation.

Student placement volumes increased 15.3% in 2018, driven by IDP's expansion into tertiary education destinations beyond Australia.

IDP has invested significantly in growing its agent footprint during the year, adding 13 offices. It has also boosted the suite of universities it offers to students with the addition of University College Dublin as well as Edinburgh University.

Gross profit grew 19% in student placements but this growth incorporates a step-up in IT system licensing fees as the business carries two third-party products during its transition to IDP's new platform.

The newly launched IDP website, along with the company's other websites, delivered a 27% increase in traffic in 2018 with a 37% increase in placement leads. This step-up in volumes will help build the placement pipeline in future years.

Overall 2018 was a very strong year for IDP and one in which it invested heavily in developing its platform to support longer-term growth. While the stock is trading at a very high multiple of its current earnings base, it continues to invest in expanding its opportunity for long-term earnings growth.

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Roger Montgomery is founder, chairman and chief investment officer of Montgomery Investment Management. Following a successful career as an analyst and public company chairman, Roger published the first edition of his stock market guide,, in 2010, becoming an Australian best seller in just 16 weeks. He holds a Bachelor of Commerce and is a senior fellow of the Financial Institute of Australasia.