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Half year revenues up 39% at EDI

publication date: Jul 1, 2008
author/source: Ed Tranham

Education Development International plc (EDI) saw half year revenues up 39% to £9.61m in the six months to 31 March 2008. EDI’s operating profit nearly doubled to 670k in the same period. These results include contributions (£1.55m of revenues) from ASET Group acquired in November 2007 for £2.3m and eNVQ and Fusion Media Networks, acquired 12 months ago. Excluding the impact of acquisitions, on a like-for-like basis EDI’s revenue increased by 17%.

Also reflected in EDI’s numbers is the disposal last January of the Group's 50.4% holding in Singapore-based Educational Resources to AIM-listed AEC Education for a loss of £490k. Since the disposal, Educational Resources has entered into an agency agreement with EDI to market LCCI International Qualifications, for a total fee of £450k.

The UK qualifications and assessment services division continues to generate the largest share of EDI’s revenues – £5.39m (56%), including a contribution of £890k from ASET and £307k from eNVQ. EDI sees the ASET and eNVQ acquisitions as providing an opportunity for cross-selling each business group’s products within the UK FE sector.

EDI’s online assessment product, Goal, has gained 119 new schools in the past six months increasing the number of secondary school subscribers to more than 600 although the renewal rate at 69% is on the low side of expectations. Schools pay an annual subscription starting from £299 per subject rising to £5k per school. The average sales value per customer has remained nearly unchanged in the past 12 months.

EDI is actively involved in the development of the government's new diploma qualifications although EDI does not expect a return from its investment until the programme is operating fully in five years’ time. The company, with a 12% market share, also seems well positioned to benefit from the increased levels of government investment in vocational qualifications in key sectors. The company estimates the value of the UK qualifications and assessment sector to be worth at least £750m and is aiming to achieve an annual growth target of 15% from its current businesses.

22% of EDI’s total revenues (£2.16m) are derived from its international qualification business via its London Chamber of Commerce and Industry (LCCI) brand. LCCI delivers 90 exams through nearly 5,000 centres in 120 countries. This market is valued in excess of £1bn and EDI’s growth target is a modest 10%.

EDI’s support and internet services division grew 53% to £2.01m including revenue of £355k from the sale of internet services through Fusion, although the impending loss of a £900k annual contract at the end of September will have a negative impact on trading in the short-term. The company now has long-term contracts in place with ACCA, OCR and RHS.

With a 2008 full year forecast of £3.1m pre tax profits on sales of £21.4 the big question for EDI is where does the company go next? Taking on the likes of Edexcel, OCR and AQA in the UK and large UK/US/Australian service providers overseas is not a realistic option.

So the acquisition targets of interest to EDI are those that extend the business vertically within its key sectors. These include publishers of related education and training support materials, providers of CPD programmes for vocational educational and training practitioners, software companies with related education and training administration applications, and agencies and delivery networks in international markets.

With a current enterprise value of between £20m and £22m EDI could also be an interesting target for a company with complementary products and services wanting to add a niche assessment player to its portfolio. The company’s share price fell 20% in June.

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