Navitas shares dive after 11pc profit fall

Navitas’s share price slumped 10 per cent yesterday after the education provider posted an 11 per cent fall in profit.

Navitas co-founder and CEO Rod Jones. Picture: Colin Murty

Navitas’s share price slumped 10 per cent yesterday after the global education provider posted an 11 per cent decline in profit for the year to $80.3 million.

The closure of two Sydney colleges, as well as adverse foreign exchange movements, weighed on the result, while “tighter market conditions” in the US and Britain constrained underlying student enrolments.

“It’s a messy set of results and that makes it difficult for people to understand what’s happened,” Navitas CEO Rod Jones told The Australian.

“The EBITDA line was impacted by a number of things, including the notification we received last Friday that we lost the value-added tax legal case in Britain, so we took a $3m hit on that. We are appealing that decision, by the way.

“We also had the currency impact, and the changes to joint venture arrangements, which now go below the line rather than above the line,” he said.

EBITDA declined 6 per cent to $155m over the year, while revenue fell 5.5 per cent to $955.2m. On a pro-forma basis, which includes joint-venture earnings and excludes foreign currency movements, EBITDA was down 1 per cent to $161m.

Underlying student enrolments grew 5 per cent in the year despite declines in the US and British markets.

“We’re in a fairly tough environment in the US right now. The rhetoric of the Trump administration has seen students pull back from enrolling there, and that’s flattened it right off for us,” Mr Jones said.

“But the underlying demand from students is absolutely still there, and it will provide an opportunity for Australia. International education is one of the government’s five core growth initiatives and they’re talking about growing international student numbers from the current 600,000 to 1 million by 2025.

“We’ve just got to get ourselves through this flat spot we’ve got at the moment,” he added.

Looking out to 2020, Navitas is expecting cumulative growth rates in student numbers of at least 5 per cent and revenue growth of 5 per cent

Despite the “messy” result, the underlying trends looked positive for the education provider, Morningstar analyst Gareth James said.

“Underneath all the noise the long-term industry trends remain positive, student growth seems good and the university division appears to be in reasonable shape.

“Today, the share price has come back to fair value. You can question the business model in the very long term, but at the moment there’s still a huge demand for Asian students to travel to Australia, and it’s becoming more difficult to travel to the US and Britain now. So the Australian business is going very well and the overall business model looks sound,” Mr James said.

The company will pay a final dividend of 10.1c a share, bringing the total FY17 distribution to 19.5c a share.