Australian universities to profit from students going elsewhere

Investment in education services provider IDP set to pay multimillion-dollar dividends as students use its language tests to head to Canada and UK

August 3, 2021
International, global, globe, world, travel, mobility
Source: iStock

Australian universities are set to reap dividends from their own misfortune as investors show faith in the worldwide profitability of international education – notwithstanding the multibillion-dollar losses predicted for education exports Down Under.

Shares in Melbourne-based education services business IDP surged 22 per cent to an all-time high of about A$30 (£16) in July after the company acquired the sole rights to deliver the IELTS English-language test in India.

The share price remained 16 per cent higher than its pre-pandemic peak, suggesting that the investor response at the beginning of the Covid-19 crisis – when the price plummeted by 56 per cent in a month – was just a blip in the company’s steadily rising value.

IDP’s price tripled in the three years after the company listed on the Australian Stock Exchange in late 2015, and has now tripled again, reflecting investors’ confidence in its IELTS business and its referrals to Canadian, Irish and British institutions.

Sydney consultant Claire Field said the buoyant share price reflected the likely strength of global demand for international education despite the “serious challenges” confronting Australian providers because of border closures.

IDP’s stock market success means 38 Australian universities can expect investment windfalls to help compensate for their losses from international students’ fees. Through a collectively owned holding company called Education Australia, they are IDP’s biggest shareholder.

“As a group, their investment in IDP shows a very strategic, long-term risk management approach,” Ms Field said. “Our universities have been earning income even where students want to study in a competitor country.”

With a restructure of their IDP ownership looming, some universities are now set to cash in their investment. Under plans announced in March, Education Australia’s 40 per cent IDP shareholding will be redistributed back to the universities – handing them assets worth about A$83 million each, on current share prices.

Fifteen per cent of the shareholding will be sold off to cover capital gains taxes from the restructure, with leftover tax credits distributed back to the universities. The shares must be sold by 11 December, with universities given first rights on buying them – along with the remaining 25 per cent shareholding, which can be sold only to other universities for the initial six months.

A source said offloading the shares would appeal to cash-strapped universities. “But some are more broke than others, so various things could happen. You could get some universities buying other universities’ stakes, or you could get university shareholdings put into the listed pot.”

The episode demonstrates the vast fortunes on offer in international education. Ahead of the pandemic, IDP boss Andrew Barkla was named Australia’s best paid chief executive, earning a reported A$37.8 million – mostly by selling off 3.7 million shares granted as part of IDP’s 2015 stock market float.

john.ross@timeshighereducation.com

POSTSCRIPT:

Print headline: Silver linings: Australian universities to profit from students going elsewhere

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