By Matthew Knott, News Editor of StudyTravel Magazine



Among our various news stories this week is an insight into the financial travails and now industrial action at the Loyalist Group in Canada.

Loyalist has been investing heavily in Canada’s international education business over the last four years, acquiring four ESL schools, four career colleges, a high school and a student accommodation business. “I formed Loyalist as a vehicle to consolidate the industry,” Founder of Loyalist, Andrew Ryu, told us back in 2013 in a special cover story on mergers and acquisitions within the study travel industry.

The news story this week reveals that the company has just agreed a  forbearance loan with its main lender to repay its acquisition credit facility, with the debt currently standing at CAN$8.9 million. The company’s share price has fallen from CAN$0.57 on April 23 to CAN$0.08 at the time of writing, with a large drop following the announcement of a loss of CAN$19.5 million in 2014.

The company boasts 17 acquisitions in five years on its website. We have argued many times over the years in the pages of STM that expansion at too fast a rate is fraught with danger, and it would seem we are faced with that situation.

And the two most recent purchases were actually Korean agencies. “By acquiring another one of our largest agency partners, we will be in a position to further reduce our direct costs of attracting students,” said Ryu (now replaced) at the time of buying Kim Okran agency. Does it reduce costs? Schools only pay an agent when they receive a student under the standard partnership. No students means no costs incurred. Owning and operating the agency brings with it an entirely new set of permanent overheads.

Agents need a reputation of independence in building a portfolio of schools to offer students a range of options. Full ownership by a school is a threat to that reputation, and may also sour relations with the agency’s other school partners.

Furthermore, teachers at PGIC in Vancouver, one of the schools in the Loyalist portfolio, are now on strike over salary negotiations. I interviewed one of the teachers at the school, Dianne Simmons, who informed me that one of the first moves when PGIC was acquired was to cut staff salaries by 30 per cent.

I’m no expert on corporate HR policies, but slashing salaries as a first move before spending millions of dollars on further acquisitions doesn’t strike me as a great way to endear yourself to your employees and retain their services. This industry is nothing, after all, without its teachers, and the reputation of a school among peers, agents and students rests to a large extent on the quality of its teaching. “It’s not a serious wage for a serious faculty,” said Simmons about the salary cap and structure on the table.

We can only hope for the sake of the schools, their students and agents that the situation is rescued and that the company’s financing plan is successful in getting everything back on a level footing.

Elsewhere, I’d like to make mention of  a fabulous idea from English Australia, which is planning a world record attempt for the biggest ever English language lesson, set to be held on the iconic Bondi Beach in February.

And to sign off, you have hopefully already received the July issue of StudyTravel magazine, but if not here is the digital version. Articles in July include a special report on English-medium education in Asia as it increasingly becomes study destination as well as source region, an agency survey report from the troubled Ukraine, a Market Analysis feature on Australia’s buoyant English language teaching market and an Industry Faces interview with Ialc Director, Jan Capper.

Happy reading!

 

 

 

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