It's a good day to be an IDP Education shareholder, with the company up 30% at the time of writing.
This strong share price action has been driven by IDP Education Ltd (ASX: IEL) releasing FY25 results this morning, which the market has reacted positively to.
While its FY25 report shows a deterioration from FY24, this reaction suggests the numbers were better than expected.
After a tough past year, with the company ranking the worst performing ASX 200 stock in FY25, the news has given investors something to celebrate.
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What did IDP Education report?
- Revenue declined 14% to $882.2 million
- Direct costs down 6%; overhead costs down 5%
- Adjusted EBIT down 48% to $119.0 million
- Net leverage of 1.4x
What else happened in FY25?
Concurrent policy restrictions across the company's four key destination markets significantly impacted IDP Education shares in FY25.
The company's 14% decrease in revenue to $882.2 million in FY25 was driven by lower volumes. Specifically, student placement volumes fell 29%, Language Testing volumes declined 18%, and Language Testing volumes increased 1%.
However, this impact was partially offset by average price increases.
Management was able to rein in costs, with direct costs falling 6% and overhead costs coming in 5% lower. Looking forward, management is aiming for more significant cost reduction in FY26.
IDP Education reported adjusted earnings before interest and tax (EBIT) of $119.0 million. While this was 48% lower than the prior year, it fell roughly at the midpoint of management's June guidance of between $115 and $125 million.
Looking forward, the company has commenced a multi-year transformation program to become more efficient.
Management expects FY26 EBIT to fall within the $115 to $125 million range, the same guidance range it gave for FY25 back in June. The company anticipates EBIT to be impacted by continued challenging industry conditions, with testing volumes expected to fall between 20% and 30% from FY25.
What did management say?
Commenting on the long-term trajectory of the business, Chief Executive Officer and Managing Director Tennalle O'Shannessy said:
Our focus this year has been on managing our business in a dynamic operating environment with priorities including profitable revenue, ongoing commitment to quality and yield and cost discipline.
The growth drivers that underpin the international education market's long-term growth trajectory have not changed..Our market leading position, clear strategy, expert team and transformation program make IDP well positioned to capture profitable growth. The program will drive immediate operating and financial improvements in FY26 and deliver investment returns over the medium term.
Share price snapshot
Even after factoring in today's 30% surge, it's been a disappointing year for IDP Education shareholders, with its share price down 52% for the year to date.
Over the past year, IDP Education shares have fallen even further, sitting 62% lower than they were 12 months ago.
From its 2021 peak of nearly $39, the company's shares have fallen around 85%.
