Education provider RedHill Education to launch $27 million IPO

Rapidly-growing education provider RedHill Education will brave the tough market conditions to launch a $27 million float that it says will help it grab a bigger slice of Australia’s $49 billion education market.

The company, which was established in 2006, has two key businesses: in English language and teacher training institution Greenwich College and Go Study Australia, which provides agency services primarily in Europe and South America.

Part of the proceeds from the float will be used to acquire two more educational institutions: IT trainer the Academy of Information Technology, and the International School of Colour and Design.

Chief executive Paul Tobin says talks with institutional investors are progressing well, with the company it has at least one cornerstone investor on board.

While market conditions remain choppy, Tobin says he is confident investors will see the strength of RedHill’s underlying business.

“You can’t control the day-to-day stuff. The US housing data overnight was just one of those things that happens.”

RedHill says it is profitable and operating cashflow positive. It posted earnings before interest, tax, depreciation and amortisation of $3.7 million in 2009-10, and plans to increase this by over 30% to $4.9 million in 2010-11.

While Australia’s export education market has taken a battering in the last 12 months, with a number of education providers collapsing and the Federal Government changing the rules regarding student visas, Tobin says RedHill has weathered that storm.

“No one is immune but what the government is really trying to do is move from migration outcomes to a more quality-based outcome. That suits us, because we are focussed on that sector. We are not exposed to the sub-continent and that’s where the impact has been most felt.”

He says the company will also remain on the hunt for acquisitions after its IPO – providing he can find the right target.

“It’s a very fragmented market. There are more than 4,000 companies just in the vocational learning space, but the number of businesses that have high-quality management teams and terrific courses is low.”