Extremely Distressing Diligence
Arrghhh! Words can’t describe the frustration I feel at Education Development International (EDI). It starts with stockmarket ticker code, which is EDD - not EDI, and continues with every syllable of its annual report. Words are in fact, part of the problem.
It ought to be so simple. The company has a turnover of little more than £20m, it appears to be growing, it’s not in debt, it’s in a business - qualifications and assessment - that, I think, is genuinely beneficial (but not flash and prone to hype), and the share price values the company at less than eight times earnings, which is not very much at all. It should be an interesting small company. All that’s left is a bit of due diligence - checking that I understand how it makes money.
I’ve read the recent regulatory news, and the latest annual and interim reports. I’ve even flicked through earlier ones. It’s been tough. Fifteen years ago, I was a secondary school teacher, so I approached EDI with optimism. I didn’t expect to stumble through the chairman’s report in a daze, as though the document was a long-forgotten exposition of Finnegan’s Wake.
The words aren’t incomprehensible, just ambiguous. What is a support service, for example? Fortunately, I have a friend in the biz, and one evening last week I bought him a shandy and got some answers. Support services are syllabuses, past papers, marking schemes, training (for teachers), and schemes of work, lesson plans - we used to call them.
More seriously, for a little business EDI’s fiendishly complicated. It sells vocational qualifications but tests school children. It owns a bewildering array of even smaller companies - including its own Internet Service Provider. It’s an exam board, and it designs and administers bespoke qualifications too. It seems to be trying to make money from every corner of the examination industry and many corners of the world, which makes me wonder what it’s ‘core’ business is, and whether it’s any good.
The story (so far):
- EDI was once Goal and its main product was an online assessment programme tied to the national curriculum for secondary schools. The idea is computerised testing and marking is more efficient than good plain old pencil and paper, but it caught on much more slowly than the company and its early dot.com investors thought. EDI still sells it to over 600 schools, which is less I think than in 2002 when 927 schools had access. You can try Goal here.
- Since then it’s bought exam boards, principally the LCCIEB (London Chamber of Commerce International Examination Board) and entered the qualification business in 2002: charging schools, training companies and businesses a fee for candidates they field in its exams and designing and accrediting qualifications for organisations that want to run exams themselves.
- Its qualifications are mostly vocational, under the EDI brand in the UK and the LCCI (London Chamber of Commerce International) brand abroad. Eighty-five per cent of its UK sales are vocational qualifications, so I think I’ve found the core business. Most of its international qualifications are vocational too.
- EDI has just completed a multi-year ‘organisational development’ program in which it has physically moved from to Coventry and redeveloped its IT systems, and now its going to go out and sell. Alan Sugar would be proud.
Since vocational education, in particular a new diploma qualification to be introduced in September, is Governments answer to NEETs (young people Not in Education Employment or Training), who otherwise have poor prospects and generally muck up the employment statistics, and since British education has a strong reputation abroad, there are grounds for optimism. Doubly so, if EDI’s moving from a period of consolidation to a selling.
So good news, today EDI revealed its new corporate image to:
…bring together into a common ‘house style’ the disparate corporate and product presentations which are the result of acquisitions made by the Company over the past three years.
It’s mailing 5,000 customers, and it’s updated the website, which was utterly shambolic, alternating the new brand EDI, with the old one, Goal (that’s a page from the old site, which still appears to be available).
But it’s been a good decade for exam boards. The government’s obsessed with assessment and league tables so one concern is why, for most of the decade, EDI has struggled? And why’s it sticking with Goal? I’ll be asking the directors when I call to check the story I’ve concocted because the positive thing about a company that doesn’t present itself well is it turns off investors*1, which may in part explain the share price. They’ll wait until the profits speak for themselves, which may give the hard-working investor an edge.
Dairy Crest on iBall
Talking of examinations, Dairy Crest has graduated from blog to iBall. Watch it, if only for the Benny Hill intro.
Footnotes:
- Though the new website is a big improvement, so perhaps that edge is about to vanish.
