Company comment: Benefits from Education

By Andrew Hore

Date: Thursday 05 Nov 2009

AIM has recovered strongly this year but one AIM company that has continually outstripped the market in the past couple of years is qualifications supplier Education Development International.

Shares in EDI have more than quadrupled in the past year. That is not just one good year. The shares are nine times the level they were three years ago and were recently more than 10 times their value three years ago before profit taking.

Consistently beating estimates has been one of the key reasons behind the rise in the share price. Other AIM companies should take note. Many company directors like to whinge that their share prices are far too low while conveniently forgetting that they have consistently failed to meet forecasts. Companies tend to be rewarded for positive surprises but if they consistently fail to meet expectations it can take a long time to recover investor confidence.

EDI had an exceptionally strong year to September 2009. It is on course to report a jump in profits from £3.4m to £8m, albeit helped along by favourable currency movements. There is around £8m of cash in the bank and EDI pays a dividend.

This begs the question can EDI continue to grow rapidly? The truth is that it will not be regularly repeating the growth experienced last year. There are good reasons why EDI should continue to grow and profits of £9m are forecast for 2009-10. That is still a good growth rate.

EDI has a strong international brand in the form of the London Chamber of Commerce and Industry. EDI can expand internationally and it has a relatively modest market share. There is also scope for gaining market share in the UK. Government funding for training is significant and chief executive Nigel Snook believes that a Conservative government would save money by ditching education quangos rather than cutting back on vocational training.

Look out for the full year results on 24 November.

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