- Social distancing and containment measures have transformed the way the education sector operates traditionally.
- More traction in the online education market has been noticed, as people started working from home and children preferring online classes over face-to-face tutoring.
- Kip McGrath Education, a child tutoring provider, delivered 20,000 online lessons weekly, a rise from 550 online lessons weekly prior to pandemic.
- With the continued uncertainty because of COVID-19 pandemic, the education sector is expected to rely more on online education in near future.
The Australian online education market has been gaining traction owing to the increasing internet penetration and acceptance of online education among Australians. According to IBISWorld, the Australian online education market revenue is expected to hit $8.1 billion through 2019-20 at a CAGR of 8.5% over the five years. The sector’s flexibility over traditional education coupled with focus on reskilling and lifelong learning will further augment the growth of the sector in the coming five years.
The sector is highly fragmented with intense competition. With 1,661 numbers of businesses operating, no one player has gained more than 5% market share. Changes in funding from the government have also added to the competition and straining revenues despite a growth of 10.1% in the current year. The industry currently employs ~23,811 employees.
The COVID-19 Impact on the Industry
The online education industry is proving to be recession proof as containment measure and social distancing has only led to more usage of online education. Social distancing is changing the way educational industry operates and prompting many educational institutions have shifted their courses to online to abide by the social distancing norms. Given that the restrictions will be lifted by phases and economic progress is yet to take a positive turn, the industry is expected to continue its growth trajectory. Australians are also up-skilling themselves to stand out in the growing unemployment market, prompting many to take online vocational courses during the COVID-19 outbreak. International students, who are unable to move to Australia, will also drive the online education market
Stock Exchange performance of few leading online education players in Australia
Companies such as IDP education, G8 Education 3P Learning, Kip McGrath Education, Redhill Education Ltd, iCollege Ltd, and UCW are providers of online classes to national and international students. With the social distancing in place, all these companies are well positioned to enroll more customers for their online courses or classes. As Australia is a major educational destination for international students, the companies stand to onboard international students as well.
Most of these companies are listed on Australian Stock Exchange. If we look at the stock performance of these companies, IDP education and G8 Education, the market leaders in the education industry, have shown positive double-digit growth in M-o-M share performance.
However, in the last three months, when the effect of pandemic and bushfires were at its peak, share prices of two companies, 3P Learning and Kip McGrath Education, increased by 8.7% and 6.4% respectively, showcasing investor’s confidence in the companies.
A look at Kip McGrath Education Centres
Founded in 1976, Kip McGrath Education Centres Limited (ASX:KME) serves primary and secondary school age children through franchisee centres. The Company provides face to face online tutoring through its product KipOnline remotely from any location. The company also offers Maths and English assessments online. Apart from Australia, United Kingdom, South Africa and New Zealand are its primary overseas operating locations.
Since February, the pandemic and bushfire challenges heavily impacted the childcare education sector. With social distancing at peak, the companies providing online tutoring option experienced surge in customers. According to Kip McGrath, prior to the COVID-19 outbreak, the Company used to provide 36,000 face to face lessons and 550 online lessons on a weekly basis.
Post COVID-19 outbreak, in the last week of May, the Company’s weekly online classes jumped to 20,000 online lessons while face to face tutoring dropped to 2,400 per week. With the economy opening up in phases and the Company’s huge addressable market, with over 20 million school age students in its key markets, face to face tutoring is expected to rise, leading to increased revenue from the company’s key market.
Financially, the Company has performed better with ten months revenue hitting $14.3 million, as on April 30th, 2020, a 12.4% Y-o-Y increase in revenue. The Company expects COVID-19 to keep impacting its business in the remaining month (for the year ended June 2020).
The Company’s cash position remains strong with a positive cash flow. No future guidance on net profit after tax and lower EBITDA than the previous ten-month period indicates the risk exposure the Company carries because of the continued uncertainty during COVID-19 pandemic.
Disclaimer: All the currencies mentioned are in AUD unless specified
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