Navitas (NVT) - Half Year Results 2018

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30 January 2018

Results

Half Year 2018

Half Year 2017

Change

Group Revenue ($m)

456.7

479.0

-5%

Bloomberg consensus ($m)

465.0

 

 

EBITDA ($m)

66.7

76.6

-13%

Bloomberg consensus ($m)

70.1

 

 

Net Profit After Tax (NPAT) ($m)

25.0

53.6

-53%

Bloomberg consensus ($m)

34.4

 

 

Interim Dividend ($)

0.094

0.094

-

Navitas (NVT) earnings held back and muddied by substantial one-offs

  • Education provider, Navitas (NVT) recorded a 53% slide in half year earnings to $25m which fell short of consensus. The result was impacted by substantial one-offs which have somewhat muddied the result and can make comparing the numbers with the prior year challenging. This includes the recent passing of the US tax cuts ($7.5m negative impact) and the conversion of its Edith Cowan College (ECC) to a joint venture (boosted NPAT by $17.3m in prior year). Note there were only few broker forecasts publically available.
  • Due to the above one-offs, the underlying result can provide a more accurate representation of its performance over the half. EBITDA fell more modestly by 13% and was held back by the closure of some colleges/partnerships (Macquarie and Curtin Universities) together with fewer Adult Migrant English Program (AMEP) contracts (from 1 July 17) in a re-tender process.
  • A fully franked 9.4 cents per share interim dividend will be paid to investors on 15 March. The stock will trade ex-dividend on 27 February (this is the key date that determines dividend eligibility). The company has flagged its plans to move to a partially franked dividend in the near future.
  • NVT generates most of its revenue from university partnerships, with enrolments lifting by 8% over the half. This division stood out (underlying revenue and earnings rose) while its smaller Careers and Industry Division (which includes English programs) went backwards. Student pass rates were high at 84% (~80% last year) and retention rates at an even higher 90% (~85% in prior year). Partnership agreements were renewed with six universities (including Deakin, Anglia Ruskin, Curtin, Brunel and Swansea was converted to a joint venture). This leaves three contracts due for renewal in the next two years. It signed a new agreement with Virginia Commonwealth University (a US university with approximately 30,000 students).
  • Looking ahead, NVT provided no fresh guidance. As flagged above, it plans to move to a partially franked dividend in the near future. This would reduce the tax benefits of its distributions. A new Group CEO was announced in October last year and will takes the reigns on 1 March 2018. Current CEO Rod Jones has been at the head of the company since 2004. NVT’s share price slumped following the result.

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