The doldrums were a miserable place for sailors in the age of sail because it was an area where the trade winds converged but a lack of surface winds meant they might be becalmed for weeks in hot, muggy weather. It’s not a bad metaphor for the higher education sector as it awaits the Migration Advisory Committee (MAC) review on 14 May and reviews of pathway courses commissioned by Universities UK and the Government after the Sunday Times “cash for courses” reporting. All of this while the signs of recovery from the pandemic are patchy and international applications have foundered after changes to visas for dependents.
For pathway operators almost entirely reliant on international students the outcomes might make it feel more like the “horse latitudes”1 where it was suggested survival was about knowing what to keep what to keep and what to throw overboard. Rumours of delayed investments and potential sales are also swirling around the sector as the uncertainty makes the future even more opaque than usual. There are few guarantees of future growth.
The past month has seen a degree of information about some UK pathway performance in 2022/23 emerge as annual accounts have been published at Companies House. While the financial years of the main pathway operators are not consistent some of the major players and their operating subsidiaries2 do have similar year ends. This blog focuses on operations where figures for 2022/23 are available.
Navitas
Overall, Navitas had a strong year in 2023 (year ending 30 June 2023) with its overall financial statement indicating a rise from 7,605 to 10,869 student enrolments.
Source: Navitas UK Holdings Limited Annual Reports
However, Navitas has lost two universities from its portfolio for Autumn 2024 enrolments with the University of Leicester and University of Northampton both terminating their pathway college contracts. On the face of it the Leicester decision was surprising given that the Global Study Centre appeared to have a student enrolment driven turnover growth of over 50% from 2021/22 to 2022/23. Northampton’s figures are still pending.
At a more granular level there are still a number of operational reports at individual college level to come for 2022/23 but up until 2021/22 Brunel and Hertfordshire had shown consistent growth in turnover (generally confirmed as being largely due to student enrolment growth) since 2019 while the ventures at Portsmouth, Swansea and Cambridge Ruskin appeared to be struggling. The scale of Northampton and Leicester is relatively small by this comparison and it may be that enrolment numbers have not met expectations.
Source: Individual Annual Reports
During 2023 Navitas appeared to be the likely winner of the contract tender for the proposed Manchester Metropolitan Embedded International Study Centre. The £150m contract was due to start in November 2023 which was the point at which Navitas changed the name of an existing company (Navitas UK College Limited) to Manchester Met IC. Not a peep since then but it has been amusing to see INTO University Partnerships posting on LinkedIn about its relationship with Manchester Metropolitan University in recent days. Perhaps a reminder to the university’s leadership that there are options.
Navitas has also been among those at the forefront of the charge to introduce the International Year One pathways that have been of particular concern to some commentators because there is no comparable option for domestic students. It remains unclear if any of the reviews will specifically consider this route but any restrictions would be damaging for future recruitment. Having acquired Study Group’s interests in Australia last year it may be that the business will look for a similar boost in the UK.
INTO University Partnerships (INTO)
With all of INTO’s UK joint venture partnerships except UEA having reported on 2022/23 it seems that enrolments from continuing UK operations have not even returned to 2018 levels let alone 2019. The problems at UEA have been discussed at length and it seems possible that a more aggressive recruitment strategy from the university might begin to pay dividends. With joint ventures struggling there is a bright spot at the wholly owned INTO Manchester which saw a second year of strong growth and enrolments up at a record 1112.
Source: Joint Venture Annual Reports (INTO UEA 2023 enrolment is an indicative figure pitched just below the 2020 enrolment figure which would represent an increase of 61% on 2022). INTO Newcastle is 51% owned by INTO.
At a corporate level INTO’s adjusted turnover3 was up from £141m to £160m year on year in 2022/23. Although the portfolio is global there has been little evidence of accelerating growth in US partners, even for direct recruitment, and the shadow of the court-case with University of South Florida seems to lengthen in terms of time before resolution. The INTO annual report indicates that what were historically shown as joint venture debtors are now shown as loans to joint ventures with almost all at higher levels than in 2019.
INTO’s early USP of 30-year deeply embedded joint venture partnerships with universities appears to have lost out to third-party, shorter-term contracts in both the UK and US. Winning Lancaster University in 2023 must have boosted morale, even though it’s not a joint venture, but geographical location, high entry standards and lack of Russell Group glitz made the university a notoriously hard sell for previous pathway providers Study Group, so the jury is still out. In the absence of a differentiated offer, several partnerships already shuttered and no real sign of a return to the boom days it is not easy to see how the company reinvents and reinvigorates itself.
Rumours of a sale earlier in the year seem to have quietened down which is no surprise given the uncertainties facing the UK. However, a number of sources have indicated that Navitas were a suitor before the pandemic and a trade sale would at least offer the benefit of consolidation in the sector and significant overhead savings. The current trading outlook and sector uncertainties do not seem strong or certain enough to attract a premium price but if the future looks no brighter there may be little point in waiting.
Kaplan
Kaplan’s corporate year end is December so we won’t get that update until later in 2024 but their joint venture international college with the University of York has a financial year aligned with the INTO operations. The 2022/23 results make stark reading and underpin that even for Russell Group universities the path is not smooth. The University’s overall recruitment problems have made the headlines and the Kaplan machine seems to be having an equal struggle at pathway level. While specific student enrolment numbers are not published the turnover and operating profit figures suggest a continuing and serious decline.
Source: University of York International College Annual Reports
As a point of contrast, INTO’s joint venture with Exeter, another Russell Group university, has shown growth post pandemic. It is twice the size of the Kaplan joint venture and Exeter is probably a stronger international brand than York. The likelihood is that both will be affected even more as global competition bites and if recruitment from China does not pick up.
Sources: INTO Exeter Annual Reports
None of this is to suggest that Kaplan’s overall performance can be extrapolated from the situation at the University of York but coterminous financial year end dates at two Russell Group universities offer a reasonable point of comparison.
When Zones Converge
The doldrums is known more properly as the Inter Tropical Convergence Zone and while people are always keen to talk about “perfect storms” affecting the higher education sector it seems to me that the forces currently converging may be more like a deep freeze. Feynman argued that even at absolute zero atoms still have some motion but it is fair to say that movement could become the exception rather than the rule. It is not an attractive outcome.
NOTES
- The “horse latitudes” are about 30 degrees north and south of the equator. They are under a high-pressure ridge which creates a dry environment (unlike the doldrums which have moist air). The name derives from stories that ships that became becalmed had to throw horses overboard in order to conserve water. Alternatively, it is suggested horse effigies were thrown into the sea to celebrate working off what was known as “dead horse” debt. A third explanation suggests the use of the term “horsed” for when a sail ship uses a strong current rather than wind to progress.
- As a general guide, most universities finish their financial year on 31 July each year, INTO has aligned its corporate and joint ventures with that and Navitas seems to have settled on 30 June in the UK. Kaplan International Colleges UK Limited and Study Group Holdings UK Limited are both 31 December year end but the Kaplan joint venture with University of York has a 31 July year end.
- Three of INTO University Partnerships’ “Key Performance Indicators” have adjustments which mean caution should be exercised in interpreting them. Adjusted turnover removes discontinued operations of which there have been at least ten since 2015.