The global COVID-19 pandemic has created havoc in the education system across the world. As a social distancing measure, governments had decided to close the schools, worship places and any other area of gathering where there could be a risk of the rapid spread of the virus. However, there has been an easing of restrictions by the state and central governments in Australia as the country has managed to curb the spread of the virus.
Current Scenario: Schools and Colleges re-opening with specific restrictions
The schools in the country are gradually opening again throughout the country. While state governments like New South Wales have asked students to attend schools one day a week, Queensland has allowed partial resumption of the school. This pandemic has changed the dynamics of the education industry where schools and colleges have shifted to online education mode to keep the learning ongoing.
Growth in Demand for Online Education in the last couple of months
During March 2020, the online education system had witnessed a decent growth as the lockdowns led to the closure of educational institutions, thus hindering the process of continuous learning. With no certainty on when the institutes might re-open, the system quickly switched to the alternate solution – e-learning.
Over the last five years, the online education industry of Australia has witnessed a sizeable expansion which was aided by the technology development as well as the growing perception of online courses. The said industry comprises of over 1,000 online education providers, which helps the industry to generate revenue of around AU$3.3 billion.
Likely impact on the Industry post the lockdown
While it may take time for all the states to allow the resumption of classes just like the pre-COVID-19 scenario, it is evident that the change will have an impact on the e-learning industry. However, all is not lost for the companies in the industry. There will be a drop in demand for services that came into prominence primarily because of the lockdowns. But the e-learning industry has many more offerings, including interactive short courses that were already picking pace before the pandemic hit the country. These offerings are expected to gain momentum in the future and support the industry.
In this backdrop, we have screened some ASX-listed online education providers:
3P Learning Limited (ASX:3PL)
3P Learning Limited is involved in the development, sales, and marketing of online educational programs to schools and parents. The company recently updated the market with the business update for the quarter ended 31 March 2020:
- Even with the uncertainty caused by COVID-19, the company experienced no interruption to its operations, which include sales, marketing, and product development. 3PL has witnessed a rise in demand for its products and services.
- It added that the full-year revenue and EBITDA would be moderated by its product sales mix, timing and increased sales commissions and variable wage costs to support customer demand.
As of now, the company is unable to evaluate the longer-term impact from COVID-19 on 3PL, education and ed-tech sectors. However, the company expects growth in group licence revenue and EBITDA during 2H FY20 against 2H FY19. 3PL expects EBITDA for FY20 to be down compared FY19 because of the outlined revenue and cost recognition factors. During FY20, the company forecasts to generate positive operating cash flows.
The stock of 3PL closed the day’s trading session at $0.765 per share on 22 May 2020, indicating a rise of 2.685% against its previous closing price. The market capitalisation of 3P stood at $103.92 million, with ~139.48 million outstanding shares. The stock has generated returns of 4.93% and -15.34% in the last three months and six months, respectively.
G8 Education Limited (ASX:GEM)
G8 Education Limited is in the operation of early education centres. The company also owns early education centre franchises. Recently, the company has wrapped up its retail entitlement offer raised a total of $75 million at $0.80 per New Share. The company has raised a total of $301 million, together with the institutional placement and institutional component of the Entitlement Offer. G8 Education would use the proceeds to provide liquidity and cement its balance sheet.
Cash preservation and cost-saving initiatives:
The company is undertaking numerous interim business initiatives to mitigate the near-term financial impact of COVID-19, such as:
- G8 is managing overall wage levels of centre-based team members via optimised team rostering in response to the current occupancy levels.
- The company has decided to decrease and defer non-essential capital and operating expenditure.
The company further added that it experienced a negative impact on occupancy levels throughout the sector due to COVID-19. The COVID-19 impacted trading conditions are anticipated to continue for at least the next six months. G8 modelling has considered various scenarios, which include an extended COVID-impacted period.
The stock of GEM closed the day’s trading session at $0.895 per share on 22 May 2020, indicating a decline of 2.717% against its previous closing price. The market capitalisation of GEM stood at $769.76 million with ~836.7 million outstanding shares. The stock has generated returns of -45.15% and -49.05% in the last three months and six months, respectively.
Janison Education Group Limited (ASX:JAN)
Janison Education Group Limited provides integrated learning and digital assessment platforms and related services. Recently, the company has inked an agreement to acquire a division of UNSW Global Pty Ltd “Educational Assessments”. The company would pay nominal cash consideration and will assume approximately $1.6m in the form of accrued employee liabilities. This acquisition would materially increase around $10 million in recurring revenue platform.
JAN is well placed to succeed amid the impact of the COVID-19 on the global education sector. The company managed to complete a capital raising of $7 million and secured key deals with Cambridge Assessment in the past months.
The stock of JAN closed the day’s trading session at $0.305 per share on 22 May 2020, indicating a decline of 3.175% against its previous closing price. The market capitalisation of JAN stood at $66.04 million with ~209.65 million outstanding shares. The stock has generated returns of -23.17% and -21.25% in the last three months and six months, respectively.
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