Strong enrolments lift Navitas as market shrugs off full-year loss

Shares in education services provider Navitas rose firmly yesterday as investors eyed solid full-year enrolment growth.

A multicultural day at Navitas College in Cabramatta.

Shares in education services provider Navitas rose firmly yesterday as investors eyed solid full-year enrolment growth and brushed off its swing to a full-year loss.

Navitas shares closed 2.6 per cent higher at $4.30, despite the company booking a full-year loss resulting from one-off charges associated with a plan to rationalise its careers and industry business.

For the year to June 30, the company recorded a loss after tax of $55.3 million, compared with an after-tax profit of $80.3m for the previous year.

But investors appeared to focus on the company’s growth excluding the one-off charges — the company booking a pro-forma earnings before interest, tax, depreciation and amortisation of $144m, in line with market expectations. Enrolment growth grew 6 per cent over the year.

“Even though the reported numbers don’t show it, the underlying numbers point to strong growth,” chief executive David Buckingham told The Australian.

For the 2018 fiscal year, reported earnings before interest and tax fell 99 per cent to $1.1m, compared to $136.4m in the previous year. Revenue fell 2.5 per cent to $931m.

The company declared a final dividend of 8c per share, 5.6c per share franked, compared to 10.1c fully franked last year.

$4.30, Navitas closed up 11¢

It comes after Navitas, which operates 120 institutions in 31 countries, announced last month that it would close two of its SAE Institute colleges in the US and investigate whether to get rid of the rest of its US schools as part of a rationalisation program.

The decision resulted in one-off charges of $123.8m.

The cost of teaching out terminated courses, staff termination and campus merger costs are likely to be $13m in fiscal year 2019 and another $5m in 2020, as the company phases out or transfers students into other courses.

The company said profits and cashflows for the SAE US operations, formerly the School of Audio Engineering and acquired by Navitas in 2011, were expected to be lower than previously forecast.

“Being frank, we’re dealing with our problems,” Mr Buckingham said. “We’ve had a tough couple of years in the university partnerships division with those colleges that are now behind us, and we’ve seen growth come back.

“The US, for example, the decision we’ve made there, it seems to me that the market understands it and can see the sense in it.” As it announced changes to its SAE US operations in July, the company said it would close or divest training provider Health Skills Australia because of changes to vocational education funding. It also said it would close SAE in Oxford in England.

Navitas recognised one-off charges totalling $123.8m for the full year, made up of $84.5m in expenses relating to SAE and Health Skills Australia.

A $9.9m non-cash write down in the carrying value of US deferred tax assets and a $29.4m non-cash goodwill impairment charge were also recognised.