UNCERTAINTY in the Australian international education sector hasn’t stopped provider Navitas from delivering a $32.6 million profit after tax for the half-year to December 31, up 18 per cent on the previous year.
UNCERTAINTY in the Australian international education sector hasn’t stopped provider Navitas from delivering a $32.6 million profit after tax for the half-year to December 31, up 18 per cent on the previous year.
Although the company’s share price has fallen significantly in recent times (see graph), Navitas credits its diversification strategy with helping the company balance domestic issues.
English language course (ELICOS) underlying earnings are down 65 per cent on the same time last year, with earnings before interest, taxes, depreciation and amortisation falling from $7.9 million to just $2.8 million.
Navitas credits the long period of uncertainty created by the federal election campaign and its aftermath, as well as changes to government immigration policy and the rising Australian dollar, for the downturn.
Earnings in all of Navitas’ other divisions are up on the previous year, however, led by the fledgling student recruitment division (up 300 per cent to $2 million), followed by work force training (up 20 per cent to $2.2 million), and university programs (up 20 per cent to $51.6 million).
Navitas chief executive Rod Jones said the fall in share price over recent months was partly driven by the company’s openness about the precarious situation of the sector.
“We’ve been saying to the market since August, we’ve been telling them exactly where we thought we were going to be,” Mr Jones told WA Business News.
Navitas still delivered a fully franked dividend of 8.7 cents per share (up 7 per cent) for the half-year, and Mr Jones said overseas operations were balancing out the onshore weakness.
“What we’ve certainly seen is a flattening in Australia, but that has been at the very least partly tempered by the increase in numbers in the UK and Canada,” he said.
The company’s strongest area continues to be higher education, with Mr Jones saying the division drove growth across the company.
Navitas has opened four colleges in the US, operating on existing campuses, and in November announced a deal to partner with the University of New Hampshire to manage an international student transfer program.
Mr Jones said higher education enrolments were being buoyed by growth in Canada, Singapore and the UK.
Chief financial officer Bryce Houghton said the company had used the Australian slowdown to implement a review of operations across all facets of the business to streamline procedures and eliminate wastage.
Navitas is also actively engaged in consultation with the government as it undergoes a review of the international education sector.
Mr Jones said he was keen to see a hybrid government-business body that would allow all parties to help steer policy.
“Tourism has got it. There is Tourism Australia, which is a peak body made up of government and industry, to drive forward Australia for tourism,” he said.
“I’d like to think we could do something like that for education as well.
“We, as well as others, have been pushing that as a potential way forward, and the response from government has been that they’re willing to consider it.”
He’s also seeking a more streamlined process for students and providers, who often have to deal with up to five government departments, split across the state and federal levels.
With a review under way, Navitas believes it has weathered the worst of the downturn.
Mr Jones said he expected the market, especially in ELICOS, to stay flat until at least April, when the first changes to student visa conditions are introduced.
He also provided an update on Navitas’ $298 million acquisition of media training provider SAE, expected to be finalised in the next two weeks.
The purchase, funded by a share placement and debt, originally caused some consternation among shareholders, who thought the company was stepping too far out of its comfort zone.
Mr Jones said initially some investors saw the SAE deal as merely a way for Navitas to boost the bottom line, but now they recognised SAE was an ongoing quality business.
Mr Jones said significant integration activities had already taken place between the two companies, and more would take place after the sale was formally completed.
Founded in 1976, SAE has grown to become one of the largest media-training providers in the world, and has 47 campuses in 19 countries.
