Reporting Season: Navitas revises strategy to revitalise earnings

By Trevor Hoey. Published at Aug 7, 2018, in Features

Name: Navitas (ASX:NVT)

Market Capitalisation: $1.5 billion

Last Closing Price: $4.19

Navitas (ASX:NVT) reported an after tax loss of $55.3 million for the 2018 financial year with the result significantly affected by $123.8 million of one-off charges associated with the recently announced plan to rationalise the business portfolio of the Careers and Industry Division.

The performance of the global education provider prior to these charges was in line with market expectations with pro-forma EBITDA of $144 million.

Despite delivering a disappointing result, management noted that continuing operations performed well in fiscal 2018 reflecting the quality of its education businesses.

Importantly in terms of the company’s future performance, Navitas exceeded its enrolments target, renewed all key university partnership agreements and expanded its portfolio of partners.

Whether it continues on this trajectory is speculative and investors should seek professional financial advice if considering this stock for their portfolio.

Focus on university partnerships division

With Navitas taking the decision to rationalise and divest its careers and industry division, investors will be focusing on the performance and prospects of its university partnerships division.

Reflecting on fiscal 2018, the achievement of 84 per cent pass rates and 90 per cent retention rates suggest that this area of the business is tracking well.

Enrolments grew by 6 per cent over the year, but average fee growth was offset marginally by a change to lower priced courses.

New agreements were signed with Virginia Commonwealth University and with Murdoch University for a managed campus in Dubai.

Five existing partner contracts were successfully renewed in the year and the Swansea University partnership was converted to a joint venture to expand its strategic opportunities.

University Partnership equivalent full time student units (EFTSU) for the second semester of 2018 increased by 6% on the previous corresponding period.

This result includes enrolments from four joint venture colleges with combined enrolments of circa 1150 EFTSU.

With the company’s shares having fallen from about $5.60 at the end of 2017 to a recent low of $3.87, shareholders will be hoping that the business restructure sees a return to profitability, as well as a more predictable earnings model, as this is one of a number of occasions where the company has disappointed in the last few years.

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

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