IDP Faces Profit Pressure as Student Volumes Plunge, Transformation Costs Loom

Challenging Market Conditions

IDP Education Limited (ASX, IEL), a global leader in international student placement and co-owner of the IELTS English language test, has revealed its FY25 financial results, highlighting a significant revenue decline amid persistent industry headwinds. The company reported revenue of $882.2 million, down 14% from the previous year, primarily due to policy restrictions across its four key destination markets that disrupted over two decades of steady growth in international student mobility.

Student placement volumes fell sharply by 29%, while language testing volumes declined 18%. Despite these volume pressures, IDP managed to partially offset the impact through average price increases of 15% in student placements and 5% in language testing.

Financial Performance and Cost Discipline

The company’s adjusted earnings before interest and tax (EBIT) dropped 48% to $119 million, aligning with the guidance range provided in June. This decline reflects the combined effect of lower volumes and ongoing market challenges. However, IDP demonstrated disciplined cost control, reducing direct costs by 6% and overheads by 5%, setting the stage for deeper savings in the coming year.

Cash conversion improved markedly to 143%, up 63 percentage points, and net leverage remained manageable at 1.4 times, underscoring a strong balance sheet position. This financial resilience provides IDP with the flexibility to invest in its transformation agenda while maintaining shareholder returns, including a final dividend of 5 cents per share, bringing the full-year payout to 14 cents.

Transformation Program, A Strategic Reset

In response to the challenging environment, IDP has launched a multi-year transformation program aimed at reshaping the business into a more efficient, technology-enabled enterprise. The first phase focuses on simplifying operations and delivering a net $25 million reduction in the cost base for FY26, albeit with one-off restructuring costs estimated between $35 million and $45 million.

Key priorities include resetting the cost structure, leveraging global purchasing power to reduce vendor expenses, consolidating systems and platforms, and accelerating digital and artificial intelligence adoption to boost productivity. This strategic pivot is designed to position IDP for profitable growth once market conditions stabilize.

Outlook and Market Position

Looking ahead to FY26, IDP anticipates continued volume declines of 20% to 30% compared to FY25, reflecting ongoing policy uncertainties. Nevertheless, the company expects to outperform revenue forecasts through price increases and operational efficiencies, targeting adjusted EBIT between $115 million and $125 million.

CEO Tennealle O’Shannessy emphasized that while the current environment remains tough, the fundamental drivers of international education growth remain intact. She highlighted IDP’s strong market position, expert team, and clear strategy as key advantages in capturing future opportunities.