IBT still breaking new ground

IBT Education is hardly a household name, yet the Perth company runs colleges across Australia and internationally that have more than 10,000 students.

IBT was an early mover in the international education sector, setting up its first college at Edith Cowan University in 1994.

It now has eight colleges in Australia and four overseas, has diversified into the vocational education sector, and plans to set up at least three more colleges around the world.

The company is valued on the stock market at more than $650 million, making its founders and major shareholders very wealthy, and analysts who follow the stock believe it should be worth even more.

Managing director and major shareholder Rod Jones, who seems remarkably unaffected by his financial and business success, said IBT was established after he saw an unmet need for a new approach to servicing international students.

“IBT really grew out of a recognition back in 1994 by myself and Peter Larsen that many of the international students coming to Australia were not succeeding, and it had nothing to do with academic ability,” Mr Jones said.

“It was more to do with the adjustment of coming to live in a different country, a different culture, a different education system, language problems and the like.”

Mr Jones said IBT broke new ground when it was established and is still ahead of the pack, which is why it has been able to expand internationally.

“We were the first private group to ever be given access to operate from a university campus in a partnership arrangement with the university,” he told WA Business News.

“From day one it just took off because we were meeting a real need. We would deliver to the students the first year in a degree but in a way that met their needs. More classes, extra teaching hours, a three-semester year

“And we built into the program additional support, in maths and English in particular.”

IBT’s business model is built around a partnership, with the universities providing the facilities while IBT recruits the students and pays for the teaching, which is mostly provided by university staff on a sessional basis.

Mr Jones said the universities benefited in several ways – use of their facilities is increased, they earn royalties per student and they gain a big pool of successful students who can slot into the second year of study.

He believes the structure of universities makes it difficult for them to achieve the same efficiency as IBT.

“Many universities have attempted to do it themselves. The reality is that very few, if any of them, have been successful in terms of getting good commercial outcomes,” Mr Jones said.

IBT has grown almost non-stop since opening the Perth Institute of Business and Technology at Edith Cowan University in 1994.

It set up colleges in Melbourne and Sydney in 1997 and Brisbane in 1999, has opened its second Perth college in the form of Curtin International College, and has expanded to the UK, Kenya and Zambia.

Mr Jones believes IBT’s success reflects its ability to strike a balance between its service goals and its financial goals.

“The development of this whole concept was not driven by dollars. I wouldn’t say it’s altruistic but it’s driven more by our belief that this was really adding value for the students and the universities, and obviously out of that we got the returns as well.”

The group diversified last year by acquiring English language trainer ACL for $55 million and vocational and corporate training provider CSM Knowledge.

It has recently established the Sydney city campus for Curtin University and plans a similar move for Macquarie University, and is exploring further expansion in the UK, Canada and China.

IBT’s multiple growth potential is one of the reasons stockbrokers are confident about its future prospects.

The company recently reported a half-year profit of $14.1 million and has foreshadowed a stronger result in the second half of the financial year.

Bell Potter Securities analyst Matthew Ward expects the company to achieve a full-year profit of $32 million and has valued the stock at $2.13 per share,

“There is potential upside to our earnings forecasts, which do not include acquisition growth,” Mr Ward said. “However, as IBT recently established a $100 million line of credit with Westpac, we believe that acquisitions will continue to form a key part of its growth strategy.”

Credit Suisse analyst Michael Luciano is even more bullish, tipping a 2006 full-year profit of $36.6 million and putting a price target on the stock at $2.40.

“Our positive view on IBT is predicated on two key planks: the opening of new university capuses; and the maturation of existing campuses,” Mr Luciano wrote in a recent research note.

“We believe IBT is making good progress towards developing new pathways programs with universities in Canada and the UK.”