IDP Education Ltd (ASX: IEL) shares are sinking on Thursday.
In morning trade, the $3.3 billion ASX 200 stock is down 15% to a 52-week low of $9.96.
This follows the release of the language testing and student placement company's half year results.
ASX 200 stock crashes on half year profit decline
- Total revenue down 18% to $475.4 million
- EBITDA down 28% to $124 million
- Adjusted net profit after tax down 46% to $58.3 million
- Interim dividend down 64% to 9 cents per share
What happened during the half?
For the six months ending 31 December, IDP Education reported revenue of $475.4 million, a 16% decline on the prior corresponding period. This was primarily driven by a sharp drop in student placement and English language testing volumes, partially offset by price increases.
Student placement volumes fell 27% to 42,016, as government policy changes dampened demand and conversion rates. English language testing volumes also dropped 24% to 683,708, largely due to weaker demand in India. On a more positive note, English language teaching volumes grew slightly, increasing 1% to 52,946.
The ASX 200 stock took steps to manage costs, with direct costs declining by 9% and overheads reduced by 14% to $167.8 million. These measures helped improve operating cash flow conversion by 18 percentage points, with 64% conversion from reported EBITDA.
However, this couldn't stop IDP Education from recording a disappointing 46% decline in adjusted net profit after tax to $58.3 million.
In light of this profit decline, the company's board slashed its interim dividend by 64% to 9 cents per share.
Management commentary
The ASX 200 stock's CEO and managing director, Tennealle O'Shannessy, was pleased with the company's performance in a tough market. She said:
We are proud of the results our global team delivered in H1 FY25, in the face of the international education sector's well-documented regulatory challenges. We have succeeded in optimising key controllables including market share, cost and average price, underpinned by our unwavering focus on the student experience, to offset the impact of factors outside our control, such as government policy.
O'Shannessy remains positive on the future due to structural growth drivers. She adds:
While governments in key destination markets are seeking to temporarily reduce migration levels, IDP believes the long-dated structural growth drivers that underpin the economic importance of international education, and immigration more broadly, support the market's long-term growth trajectory. Our clear strategy, expert team, and disciplined investment approach position us well to drive shareholder value over the longer-term.
No earnings guidance has been provided for the full year. However, the company advised that if current trends continue, international student volumes are expected to decline by 20% to 30% in FY 2025 relative to the volumes reported for FY 2024.
