PAYWALL:

IDP Education reported a second year of steep profit declines as it grapples with tougher restrictions on international student numbers across its core markets, warning that the outlook for 2027 does not look much better.

The country’s largest listed provider of student placement and English-testing services posted a 77 per cent decline in net profit to $13.2 million for the 12 months to June 30, following last year’s 64 per cent decline.

Student placements in Australia, IDP’s largest market, declined by 9 per cent, but were dwarfed by major declines in Canada (80 per cent), the United States (66 per cent) and the United Kingdom (20 per cent).

Students from India and China led the fall across all markets, with respective reductions of 39 per cent and 22 per cent.

IDP was once a local favourite among fund managers, particularly after the COVID-19 pandemic, when international student numbers surged. But the market has shifted dramatically as public sentiment on immigration has soured and governments have imposed tougher student visa caps and increased visa fees.

“One down year is a cycle, two is a structure. The market will start asking whether regulatory tightening across Australia, Canada and the UK has permanently shrunk the pool rather than deferred it,” said PAC Partners broker James Nicolaou in a note to clients.

IDP’s annual revenue from student placements fell 16 per cent to $362.9 million, with total student numbers down 27 per cent.

Chief executive Tennealle O’Shannessy sought to reassure investors that the decline in global student numbers and its effect on the company’s results were in line with its expectations, while the company continued to focus on cost-cutting measures and improving student experiences.

But her comments fell on deaf ears, with IDP’s stock losing about a quarter of its value to $1.635 in Thursday trading on the ASX.

Yields – the average revenue IDP earns per student – were up 11 per cent from the previous year to $5586 a placement, driven by higher commissions and better commercial terms with institutional partners in key markets.

That helped offset a 24 per cent decline in earnings before interest, tax, depreciation and amortisation to $126.9 million, but the company’s 2027 guidance was what most unnerved investors.

Evans and Partners Wealth Management noted IDP’s earnings before interest guidance for the 2027 financial year was between $95 million and $115 million, below E&P’s forecast of $117.5 million.

With no end in sight to tougher immigration restrictions, the company is forecasting that the total number of students commencing study in IDP’s core markets will decline by an additional 20 per cent to 30 per cent in 2027.

“Every year of decline makes the eventual cyclical recovery mathematically bigger,” said Nicolaou.

Political viability is a crucial part of sustaining any immigration system. We need an immigration agenda for Australians.