EDU Holdings raises concerns over impact of Australia’s new migration strategy

Tertiary education owner-operator EDU Holdings (ASX: EDU) has warned that its future earnings may be impacted by the federal government’s recently-announced migration reduction strategy.

Fresh off announcing a 244% increase in new student enrolments in term 2, non-executive chair Gary Burg says the plans to significantly reduce the overall number of international students entering the country has caused some consternation among the education fraternity.

Speaking at the company’s AGM, Mr Burg told shareholders that a key component of this strategy is for net migration to return to its long-term average of around 250,000 per year, compared to the 518,000 recorded in 2023.

Education integrity

“One of the eight key actions in the migration strategy is ‘Strengthening the integrity and quality of international education’,” Mr Burg said.

“Being the largest contributor to net migration, the [education] sector is very much in focus.”

“Through a range of policies, visa settings and other measures, the government is seeking to reduce the overall number of international students in the country, while at the same time shaping demand towards genuine students in areas of skills shortages to support the Australian economy and cleansing the sector of practices and providers that have undermined its integrity.”

Potential beneficiary

He noted that, with EDU relatively well-positioned as a high-quality provider of employment-focused courses, it may be a beneficiary of some of the changes.

He countered that, as regulation is by its nature a blunt instrument, impacts are being felt across the sector.

“As such, we anticipate 2024 will likely be a challenging year as the market adjusts to the new settings, particularly in the vocational education sector where the decline in student visa grants has been most impacted,” he said.

“EDU is in no way immune to these market conditions, however, I am pleased to advise that we have had a good start to 2024, particularly within our Ikon business.”

The increase in enrolments at Ikon – the company’s private institute of higher education in creative therapies, early childhood education and counselling / psychotherapy – helped it achieve first-quarter revenue of $7.8 million.

Mr Burg said that at that rate, EDU has the potential to achieve a 44% year-on-year revenue increase to $31.2m.

Ikon growth focus

“Over the past several years, we have invested heavily in building Ikon into a quality institute delivering higher education and it is pleasing to see a positive return on this investment,” Mr Burg said.

“Having now developed strong foundations, our current focus is on broadening Ikon’s course offering through new program development.”

He also told shareholders EDU is making good progress in integrating its higher educational and vocational operations through a shared services operating model.

“Building on our group finance, people and culture, marketing and IT functions, we now have EDU sales and admissions, EDU campuses and will soon have EDU student experience and enrolments functions.”

“We expect this model to support organic growth and efficiency and, at the appropriate time, acquisitions.”

“While the board and I remain cautiously optimistic about the future, it is a challenging operating environment.”

“Remaining steadfast in our commitment to EDU delivering quality education and student outcomes is more important than ever.”

“Our view is that this commitment underpins our future success.”