INTO The Interim

Back in June 2021, INTO University Partnerships (INTO) appointed Olivia Streatfeild as its first woman CEO, and in June 2022 she became the first woman Director.  There were plenty of strategic decisions to make as the world struggled out of a debilitating pandemic and INTO reflected on a five-year period when it had lost six joint ventures and struggled to maintain enrollment volumes.  Just two years later agents have been briefed that long-term Andrew Colin lieutenant, John Sykes, is stepping in as Interim CEO.

As well as being a main board director and a “co-founder”, Sykes has been part of the operational, decision-making Executive Team throughout the last decade.  While the presumption might be that this will mean continuity it will be interesting to see how many of the Streatfield decisions stick.  Here are some other issues that might need attention.     

Beware the Fog On the Tyne

INTO’s engagement with Newcastle University has had its shares of ups and downs.  Since 2016 the average number of students enrolled in the INTO Newcastle center has varied from 1142 in the best year down to 627 in 2021/22.  The fluctuation in Operating Profit reflects the sensitivity to student enrollment.

NB: The Operating Profit excludes significant exceptional items in 2016, 2017 and 2018.  The 2019 and 2021 figures are as adjusted in the INTO Newcastle University LLP Annual Report.

In 2021 the LLP’s Annual Report noted that the joint venture based in Newcastle has moved to majority ownership of 51% by INTO.  The joint venture launched in London in 2015 as INTO Newcastle London and long term readers will know the shifting sands of the INTO operation in Middlesex Street, including the links with Josef Mifsud whose whereabouts remain unknown.  INTO Newcastle London came under the sole control of Newcastle University in late 2020 and while the changes in controlling party mean any intercompany transactions are no longer reported by INTO, we do know that in 2020 the JV was a indebted to INTO to the tune of £5.4m.

A small sideshow is that Newcastle University awarded a year-long contract starting in January 2023 for ‘The Provision of International Market Research and Business Development – USA’ including ‘in-country liaison, advice and marketing activity to support the University’s strategies.’  Perhaps surprisingly this was not entrusted to INTO’s US team but to Foothold America Inc.  To be fair Newcastle had already been awarded two contracts to INTO worth around £1m, starting August 2022 and November 2022, for similar work over three years in South/South-East Asia and China respectively.

Magic Kingdom or Repo Man

The US was once seen as the land of opportunity for pathway operators but it’s become increasingly harder work and INTO’s exposure is second only to Shorelight. The legal battle between INTO and USF is likely to be disruptive, time consuming and expensive and it continues with the next hearing scheduled for 10 May and a new round of discussions with a mediator to come.  All the while, legal arguments are being made about the extent to which the USF Directors may or may not have been in breach of their fiduciary duty to the joint venture.

If that’s not enough of a headache, 2023 has seen the end of the joint venture with Illinois State University added to the closures at Colorado State University (2021), Marshall University (2020) and Washington State University (2022).  The operation at St Louis University became wholly owned by INTO in 2021 and despite added firepower on the business development side in the US there does not appear to have been much progress in adding many new partners – either joint venture or direct recruitment.  Meanwhile, the enrollment decline in continuing operations at flagship joint ventures like Oregon State University are evident.

Source: Oregon State University Office of Institutional Research

The company’s own research suggests that only 34% of China, HK and Macau agents surveyed think they will send more students to the US in the coming year which, by implication, means 66% will send the same or fewer.  The struggles of the last few years have also seen US joint ventures stacking up increasing levels of debt to INTO with every single US joint venture showing higher debt than the year before in the 2022 Annual Report.  It is difficult to see the way forward.             

Happy Mondays or The Fall as Manchester Decides

In July 2019 the University of Manchester awarded a five-year contract to INTO’s wholly owned Manchester operation for “Managed Service Provision of Pre-Degree Programmes for International Students”.  It has probably been a significant driver of the INTO Manchester performance over the years and 2021/22 saw the operation roar back to achieve record recruitment and profit.  The contract was for 300k and the contract period ends in July 2024.

Alongside that is the tender for an embedded study center with recruitment opportunity with Manchester Metropolitan University (MMU) which is currently a partner of INTO Manchester.  It’s arguable that over the years MMU has done less well in terms of international enrollment than the popularity of the city suggests it should.  Both Kaplan (at Liverpool) and Navitas (at Swansea) have shown their willingness to become involved in capital projects as joint ventures so competition for the business could be hot.

If another provider wins either the University of Manchester business when it becomes due or the Manchester Metropolitan tender the consequences could be serious.  If it all goes wrong for INTO, the office by the Brighton seaside might echo to Morrissey lyrics like ‘Hide on the promenade, etch a postcard/’How I dearly wish I was not here.’

UK OK OR KO?

It looks like recruitment numbers are perking up in the UK but recovery is patchy with INTO UEA looking to be on life support as the university and the joint venture struggle with competitive realities.  While INTO University of Exeter enrollments withstood the pandemic reasonably well there has been little evidence of recovery in the recently released 2021/22 Annual Reports of joint ventures with Stirling, Queen’s or City .  While the HE sector in the UK has seen record international student recruitment over the past two years it does not seem to be feeding into pathway numbers.

Source: Joint/Venture Wholly Owned Annual Reports and INTO University Partnerships Annual Reports (NB: INTO UEA does not report for 2021/22 until July 2023.  For that reason the 2022 Total enrollment shown excludes the JV and is not wholly comparable with previous years.)

With Australia re-asserting its competitiveness, the US open for recruitment, Canada thriving and some evidence that increasing numbers of Chinese students are looking elsewhere for higher education it’s unlikely to get any easier.  INTO’s recent win at Lancaster University was good news for them but the QAA reports indicate that in 2018 it only had around 280 students and sector feedback is that Study Group found it hard going.  Whatever happens, the UK situation carries plenty of risks.

Sticking to the Knitting and Counting the Beans

The Interim CEO may want to look at some ratios and data from the INTO University Partnerships Limited Annual Reports available at Companies House.  The first confirms that the US contribution to turnover reflects the decline of the business.  Whether it can or will come back is an open question but I doubt it’s something to bet the house on.

A second issue worth thinking about is that data on staff attributed to the Group makes interesting reading.  Group staff costs in 2021/22 were more than 50% of turnover while in 2018/19 they were only around 38%.   It is possible that the categories have some underlying nuances and there have been job cuts in recent months but it seems a good starting point for operational efficiencies. 

Finally, in 2020/21 the number of employees earning over £100k a year was 40 while in 2021/22 it had grown to 48 – that’s 20%.  The number earning over £275k was four compared to one the year before.  For a business with revenue that was lower than 2019/20 that needs some unpacking.

The Big One

Perhaps the biggest strategic question is about the future ownership of the business and how quickly Leeds Equity would welcome some return on the £66m investment they made a decade ago.  The appointment of two relatively high-profile non-executives to the Board might suggest some intention to seek new external investment.  It’s also possible that Andrew Colin could take the business back into 100% sole control.

The final intriguing possibility, given the volatility and possible consolidation in the sector, is that this could be the moment where the business is sold.  Back in 2018 there were widespread reports that the business was up for sale with a price tag of £300m and in a sector full of rumours there have been unconfirmed suggestions that Navitas was showing interest shortly before the pandemic.  Taking on Lancaster, getting Manchester right and sorting out Newcastle would certainly strengthen the hand in any negotiation.

NOTES

Links are provided to publicly available information where possible.  Speculation and rumour are noted as such.  As always, the author would be happy to receive authoritative clarification on any specific points and will note any amendments.

Just some small notes on a few of the sub-headings:

1. Fog on the Tyne is a 1971 album and a single by Lindisfarne.  Footballer Paul Gascoigne provided vocals on a reworked single version that got to number two in the charts in 1990.

2. Magic Kingdom is a theme park at Walt Disney World where “fantasy reigns” while Repo Man is a 1984 film with a strong underlying commentary about the “last defense of capitalism” and “no sense of purpose”

3. The Happy Mondays and The Fall are Manchester bands.  The Happy Mondays were part of the Madchester sound of the 1980s and were named for the day their unemployment benefits arrived – “the day for getting off your face” as bassist Paul Ryder explained.  With 31 studio albums in 40 years (1979 to 2017) The Fall gloried in DJ John Peel’s description “they are always different; they are always the same.”   

Image by Gerd Altmann from Pixabay