Education Development International (EDI) provides education learning materials and exams to educational establishments in both the UK and overseas. It does not receive any direct funding from the UK government, but around 60 per cent of revenues are linked to government-funded vocational and training programmes.
So how badly will EDI suffer from the coalition's comprehensive spending review? There's no doubt that there will be a clamp down on non-EU students learning English at non-degree establishments, but EDI's UK courses are heavily biased towards basic skills - and that magic word 'apprenticeships'.
The company is "cautious with a smile" over prospects. And it has a lot of attractions: for starters, operating profit margins are over 30 per cent and the business also generates impressive cash flow. In the latest trading period, cash balances rose £740,000 to £10.2m, even after allowing for a £2.7m share repurchase and £1.18m spent on an acquisition. EDI has the fire-power to diversify and will.
For 2010-11, broker Brewin Dolphin forecasts sales of £31m and a rise in adjusted pre-tax profits from £9.9m to £10.5m. After allowing for a 22 per cent tax charge (down from 26 per cent last year), EPS will work out slightly higher at 13.9p.
EDUCATION DEVELOPMENT (EDD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 110p | MARKET VALUE: | £62m | |
| TOUCH: | 108-112p | 12-MONTH HIGH: | 162p | LOW: 92p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 34p* | NET CASH: | £10.2m | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 14.2 | 1.33 | 2.3 | 0.20 |
| 2007 | 16.3 | 2.04 | 4.4 | 0.33 |
| 2008 | 21.5 | 2.77 | 6.0 | 0.42 |
| 2009 | 28.3 | 8.03 | 11.3 | 1.60 |
| 2010 | 29.5 | 9.31 | 13.7 | 2.30 |
| % change | +4 | +16 | +21 | +44 |
Ex-div: 29 Dec Payment date: 28 Jan *Includes goodwill and other intangible assets of £9.4m, or 17p a share | ||||
