After undertaking significant capital raising and promising about five-times its 2021 EBITDA, tertiary education company EDU Holdings (ASX: EDU) has decided to terminate its acquisition agreement with the Nurse Training Australia (NTA).
The $6 million acquisition, initially disclosed on June 2, 2022, hinged on NTA obtaining reaccreditation for its Diploma of Nursing program from the Australian Nursing and Midwifery Accreditation Council (ANMAC). NTA applied for reaccreditation over a year ago. Although some progress has been made, ANMAC’s evaluation is still in progress, and there is no clear indication of when a final decision on the application will be made, according to the Board of EDU’s understanding.
ANMAC were due to make a decision on NTA’s application at its June meeting, however that didn’t happen.
Because of the delay in obtaining reaccreditation, NTA has been unable to accept new nursing students throughout 2023. This has resulted in a reduced number of nursing students and ongoing uncertainty about when the reaccreditation process will be completed and its outcome. As a result, the EDU Board has concluded that the acquisition is no longer advantageous for the Company.
EDU pursued the acquisition of NTA because it felt that the nurse training market was very appealing due to several factors. These included promising employment opportunities for graduates, limited competition from providers targeting international students and the potential to create an advanced nursing program that would enhance the overall value of the Group’s nursing students. Additionally, nursing being listed on the Skilled Occupations List presented the potential for international students to explore permanent residency opportunities.
The NTA acquisition was projected to increase EDU’s revenue by 18% and its EBITDA by 65% based on proforma data for CY21.
However, there is still positive news as EDU’s other divisions continue to perform well. Despite facing challenges in 2022, Australian Learning Group (ALG), its vocational education business, experienced an improvement in Term 3, 2023, with a 45% increase in student enrolments compared to Term 2, 2023. New student enrolments also saw substantial growth, rising by 79% compared to Term 3, 2022. However, total enrolments for the year-to-date in 2023 declined by 15% compared to the same period in the previous year. The decline in ALG’s total enrolments by 38% in 2022 was primarily attributed to delays in visa processing and Covid restrictions.
As for Ikon, the institute for creative therapies, early childhood education, counselling, and psychotherapy, new student enrolments in Trimester 2, 2023 decreased by 22% compared to Trimester 1, 2023. Nevertheless, when compared to Trimester 2022, new enrolments witnessed a positive growth of 46%.
During 2022, the Company experienced a loss of $1.5 million in EBITDA, despite generating $18.1 million in revenue. ALG’s recovery has been bumpy, and according to EDU, it is expected to remain so for a while.
As of June 30, 2023, EDU held $6.3 million in cash, with $4.5 million kept aside for the initial completion payment of the NTA acquisition. In keeping with its long-term strategy, the Company will keep growing its existing Ikon and ALG businesses. As it puts the NTA acquisition in its rear-view mirror, it plans on pursuing new, accretive acquisition opportunities, keeping shareholders safe from any potential loss-making businesses.
Alinda is a Business Reporter for The Sentiment
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