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Melbourne-headquartered IDP Education (ASX: IEL), the world's largest student placement company and a major English Language Testing System (IELTS) provider, is feeling the reverberations of visa shake-ups in its key markets of Australia, Canada and the UK with a significant decline in enrolments since the start of 2024.
All three counties have targeted international student numbers in different ways in a bid to resolve their respective housing crises, and on IDP's home turf of Australia this has already led to a 28 per cent decline in international student visa issuance.
Australia has visa approval rates as part of plans to cut net overseas migration in half year-over-year in FY25, while at the start of 2024 Canada announced a temporary two-year cap on international student visa applications with an implied reduction of 28 per cent in new permits this calendar year.
The UK's method to cut numbers has been to lift financial capacity requirements for international students, alongside tougher compliance standards for institutions and new rules this year that mean international students cannot access a visa for a dependent without being enrolled in a postgraduate research program.
The declines in international student visa approvals in Canada and the UK were 27 per cent and 21 per cent lower respectively in the first three months of 2024.
Despite these restrictions, IDP expects its student placement volumes will still increase by 15-20 per cent in the current financial year which will soon draw to a close, although IELTS volumes will be down 15-20 per cent.
The total number of new students commencing study in IDP’s six key destination markets is projected to fall by 20-25 per cent year-on-year in FY25.
IDP Education asserts that average fee growth is offsetting some of the impact, and it remains confident in the long-term growth drivers of the industry. The Australian group will respond by focusing on further building its market share which has already risen, "evidenced by recent industry statistics which continue to show IDP’s superior visa approval rates and relative volume performance".
The group believes there will be a "flight to quality" amidst "increasing regulation on the use of poor quality agents" which raises the barriers to entry, and in order to consolidate its position IDP plans to also focus on product innovation and cost reduction.
IDP is already implementing a cost reduction program for FY25 that is "not expected to impact the company’s operating footprint", aligning expenses with the near-term outlook.
"This program will enable IDP to continue to invest in growth drivers, strategic programs and to appropriately reward and retain its experienced global staff whilst aligning total expenses to the near-term revenue outlook," the company states.
"Despite the current cyclical dynamics, IDP remains confident in the long-term structural growth drivers for the international education market.
"Whilst governments in several countries are currently seeking to temporarily reduce migration levels, IDP believes the long-dated structural growth drivers that underpin the economic and social importance of the international education industry, and immigration more broadly, will underpin the market’s long-term growth trajectory."
This optimistic sentiment was unable to sway investors today, with shares down 4.7 per cent at $14.95 at the time of writing, cutting the group's market capitalisation by more than $200 million in one morning. Shares are down by almost a quarter since the beginning of 2024.
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