Navitas (ASX:NVT)

David Buckingham
MD
Market Cap (AUD): 2.09B
Sector: Consumer Discretionary
Last Trade (AUD): 0 +0 (+0%)
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1. About

Navitas is a leading global education provider that delivers an extensive range of educational services to over 80,000 students annually through more than 120 institutions in 31 countries. Navitas locations throughout Australia, North America, Europe, Africa, and Asia, and over 80,000 current students, the Company understand the world’s learning needs. For more than two decades, Navitas has helped its partner institutions across the globe to achieve sustainable growth by cultivating a more diverse and internationalised campus. Its partnerships with industry and professional bodies deliver work integrated learning programs, with benefits for students, employers, universities and the economy.

2. Business model

 

The Company operates the following divisions:[1]

 

Division

Revenue ($’000)

% of Revenue

% of Profit (bef Int, Tax, Depn & Amort)

Profit drivers[2]

University Partnerships

$598,887

64.4%

161.2%

  • Overall enrolments were up 6% in FY18 compared with FY17 due to continued strong demand for quality education opportunities by international students
  • The average price growth across the colleges was offset marginally by a change in programs and university mix
  • The Division recorded 4% growth in revenue to $598.9m with EBITDA of $132.1m. The prior comparative period included contributions from the closed Macquarie and Curtin Sydney colleges and from ECC before conversion to a joint venture. Excluding these non-recurring items University Partners revenue grew 7% and EBITDA grew 9%

Careers and Industry - SAE

$203,417

21.9%

(36.5%)

  • Careers and Industry revenue for continuing operations decreased to $317.5m and EBITDA decreased to $45.6m following a reduced number of AMEP contract regions and the effect of restrictive Vocational Education funding on Health Skills Australia and ACAP. SAE opened a new campus in Hannover, Germany, and relocated or refurbished the Paris, Glasgow and Brisbane campuses to allow for greater growth

Careers and Industry - PEP

$114,146

12.3%

18.8%

Corporate

$13,243

1.4%

(43.6%)

N/A

3. Strategy

 

Key strategies include:[3]

 

Navitas continued to pursue its strategic plan in FY18, incorporating the following vision and goals:

Division

University Partnerships

Vision

  • To be the preferred transformation partner to universities around the world

Goals

  • Extend and enhance University Partnerships contracts, services, and student outcomes
  • Develop new products
  • Develop new partners
  • Transform to broader partner activities

 

Careers and Industry

Vision

  • Provide students with a quality, valued education in segments with strong employment prospects

Goals

  • Refocus the Division into industry aligned sectors
  • Increase performance of the core including academic outcomes
  • Build or acquire new industry niches
  • Develop online and EdTech opportunities

 

Navitas Ventures

Vision

  • Support the ideas, people and companies that will shape the future of Higher Education

Goals

  • Appoint key resources and establish deal pipeline
  • Make investments that provide a 15% minimum IRR to Navitas Gain access to new capabilities that enable, extend and hedge Navitas’ core business

4. Markets

     

The Company operates in markets including:[4]

 

Industry (Australia)

Industry Revenue (2018)

Growth Rate

University And Other higher Education

   $33 billion

 2.9% (annual 14-19)

Technical And Vocational Education And training

     $12 billion

2.3% (annual 14-19)

Art And Non Vocational Education

       $6 billion

 5.5% (annual 13- 18)

5. Competition

     

Major competitors include[5]

 

  • Far Eastern University Inc.
  • RedHill Education Ltd (ASX: RDH)
  • Academies Australasia Group Ltd (ASX: AKG)
  • Site Group International Ltd.

6. History

 

1994[6]   

Founded in Australia

 

2004   

Listed on Australian Stock Exchange

 

2009   

Selected to run La Trobe University International College

 

2011   

Navitas partnering with Birmingham City University

Sells SAE Dubai and Collaborates with Abu Dhabi Government

Navitas completes acquisition of SAE

Successful Completion of Share Purchase Plan

 

2014   

Expanding creative media footprint- agreeing to acquired California College

 

2015   

Opening sixth US college in partnership with Florida Atlantic University

 

2016   

Navitas and ECU completing restructuring of PIBT

 

2017   

Navitas finalises Adult Migrant English Program contracts

Navitas completes acquisition of Christchurch College of English Limited

Navitas renews partnerships with Curtin University for Curtin College and Curtin Singapore

Navitas renews agreement with the University of Manitoba   

 

2018   

Navitas continues Netherlands expansion with new Pathway College Agreement with The Hague University of Applied Sciences

Navitas expands into the Netherlands via partnership with the University of Twente

Navitas to partner with Murdoch University to support Dubai campus

7. Team

 

Board of Directors[7]

 

Tracey Horton – Non-Executive Chairman

David Buckingham – Group CEO and Managing Director

Tony Cipa – Non-Executive Director

Diana Eilert – Non-Executive Director

Lisa Paul – Non-Executive Director

David Robb – Non-Executive Director

 

Management Team

 

David Buckingham – Group CEO and Managing Director

Philip Mirams – Chief Financial Officer

Bev Hudson – Acting CEO of University Partnerships, Australasia

Scott Jones – CEO of Navitas Careers and Industry

Rob Lourey – Head of Human Resources

Paul Lovegrove – CEO of University Partnerships, Europe

Mick Campbell – Chief Information Officer

Iain Rothwell – Chief Commercial Officer


read more

8. Financials

 

2018 Full Year Results Presentation

 

Financial Year 2017/18 (ended 30 June):[8]

 

Division

Revenue ($’000s)

% Change

Profit (before Int, Tax, Depn & Amort) ($’000)

% Change

University Partnerships

$598,887

204.3%

$132,142

0.7%

Careers and Industry - SAE

$203,417

201.4%

($29,913)

(199.9%)

Careers and Industry - PEP

$114,146

165.5%

$15,438

(50.3%)

Corporate

$13,243

406.5%

($35,708)

4.1%

Total

$929,693

197.5%)

$81,959

(47.1%)

9. Risk

 

Major risks include:[9]

 

Capital risk

When managing capital it is the Company’s objective to maximise the returns to shareholders as measured by Economic Value Added (EVA®), whilst also ensuring that the entity maintains a balanced capital structure that provides flexibility for the Company to invest in its business to achieve its strategic goals. The Company regularly reviews its capital structure to ensure that the Group takes advantage of favourable costs of capital. As the market is constantly changing, the Company will: actively review the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares, and initiate on market share buy backs, and drawdown on/repay bank borrowings to ensure that capital is managed appropriately.

 

Financial risk

 

Interest rate risk

The Group’s exposure to market interest rates relates primarily to the Group’s long-term borrowing obligations with a floating interest rate. The Group’s debt facilities allow borrowings in multiple foreign currencies, accordingly, interest rates on interest-bearing loans of the Group currently range from 1.0% to 3.6% (2017: 0.6% to 3.0%). The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt, and that between 50% and 75% of core borrowings must be at fixed rates of interest. Core borrowings is defined as the lowest level of borrowings forecast in the Group’s forward projections.

In the absence of fixed rate debt the Group’s policy allows for the use of interest rate swaps, collars, and caps. Where the Group enters into fixed rate debt it is understood that this creates a fair value exposure as a by-product of the Group’s attempt to manage its cash flow volatility arising from interest rate changes. The Group has entered into interest rate swap contracts, in order to protect against rising interest rates, under which it has a right to receive interest at variable rates and to pay interest at fixed rates. At 30 June 2018, the value of interest rate swap contracts held was $143.580m (2017: $131.506m).

 

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in different currency from the Group’s presentation currency) “Transactional risk”, and the Group’s net investments in foreign subsidiaries “Translational ris

Transactional risk

The Group’s foreign currency risk policy is to only hedge known and committed exposures

Translational risk

The Group’s policy is to hedge its exposure to fluctuations on the translation of its foreign operations by holding net borrowings in foreign currencies, where the unhedged exposure exceeds $10.0m. This is currently limited to the Group’s Euro, US Dollar, Canadian Dollar and Singapore Dollar exposures.

 

Credit risk

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables, other financial assets and derivative instruments. The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments.

 

Liquidity risk

The Group’s objective is to maintain a balance between the continuity of funding and flexibility through the use of operating cash flows and committed available credit facilities. The Group has a series of five year multi-currency bilateral revolving credit facilities for $400m. Of this facility $100m expires in December 2020 and $300m expires in December 2022. These facilities are split into two tranches. Tranche A is $320m and wholly consists of credit facilities, whereas Tranche B is $80m and is primarily for contingent instrument requirements. A total of $325.277m (2017: $308.164m) had been utilised of the total facility, split between lease rental and performance guarantees of $63.138m (2017: $60.131m) and borrowings of $262.139m (2017: $248.033m). Cash flows from operations for 2018 were $92.301m (2017: $101.534m).

References

  1. ^ Annual Report 2018, P. 64
    https://www.listcorp.com/asx/nvt/navitas/news/annual-report-to-shareholders-1983641.html
  2. ^ Annual Report 2017, P. 18-22
    https://www.listcorp.com/asx/nvt/navitas/news/annual-report-to-shareholders-1983641.html
  3. ^ Annual Report 2018, P. 08
    https://www.listcorp.com/asx/nvt/navitas/news/annual-report-to-shareholders-1983641.html
  4. ^ http://www.ibisworld.com.au/industry/default.aspx?indid=600
    http://www.ibisworld.com.au/industry/default.aspx?indid=601
    http://www.ibisworld.com.au/industry/default.aspx?indid=603
  5. ^ https://quotes.wsj.com/AU/XASX/NVT
  6. ^ https://www.linkedin.com/company/navitas_2 https://e6c67dfea7107c66cf4b-5fe525cefecba56744297355853ea71e.ssl.cf6.rackcdn.com/Navitas_Investor_Day_Presentations.pdf
    https://e6c67dfea7107c66cf4b-5fe525cefecba56744297355853ea71e.ssl.cf6.rackcdn.com/Navitas_expands_creative_media_footprint__agrees_to_acquire_California_college.pdf
    http://www.asx.com.au/asxpdf/20091209/pdf/31mmw90kccxblt.pdf
    http://www.asx.com.au/asxpdf/20111229/pdf/423k3rn4t48t6b.pdf
    http://www.asx.com.au/asxpdf/20160930/pdf/43bm385f4t7533.pdf
    http://www.asx.com.au/asxpdf/20110616/pdf/41z835pmgq42zv.pdf
    http://www.asx.com.au/asxpdf/20110207/pdf/41wmtqk7lpbr20.pdf
    http://www.asx.com.au/asxpdf/20110118/pdf/41w7qhf30fm3gf.pdf
    https://www.listcorp.com/asx/nvt/navitas/news/amep-contracts-signed-1576015.html
    https://www.listcorp.com/asx/nvt/navitas/news/navitas-completes-acquisition-of-ccel-1761232.html
    https://www.listcorp.com/asx/nvt/navitas/news/navitas-renews-agreements-with-curtin-university-1760961.html
    https://www.listcorp.com/asx/nvt/navitas/news/navitas-renews-agreement-with-the-university-of-manitoba-1579318.html
    https://www.listcorp.com/asx/nvt/navitas/news/navitas-signs-pathway-college-agreement-with-thuas-1983074.html
    https://www.listcorp.com/asx/nvt/navitas/news/navitas-expands-into-netherlands-with-university-of-twente-1932831.html
    https://www.listcorp.com/asx/nvt/navitas/news/navitas-to-partner-with-murdoch-university-in-dubai-1827107.html
  7. ^ https://www.navitas.com/organisation/directors
    https://www.navitas.com/organisation/leadership_team
  8. ^ Annual Report 2018, P. 64
    https://www.listcorp.com/asx/nvt/navitas/news/annual-report-to-shareholders-1983641.html
  9. ^ Annual Report 2018, P. 13, 82-85
    https://www.listcorp.com/asx/nvt/navitas/news/annual-report-to-shareholders-1983641.html