navitas fy13 interim results presentation

For the period ended 31 December 2012 ASX: NVT

SUCCESS THROUGH DIVERSITY FY13 HALF YEAR RESULTS

2 NAVITAS – HALF YEAR RESULTS PRESENTATION – 31 DECEMBER 2012 – ASX: NVT

Disclaimer

Important Notice and Disclaimer

This document has been prepared by Navitas Limited ABN 69 109 613 309 ("Navitas" or the "Company"). Information in this document should be read in conjunction with other Navitas announcements made to ASX.

This document has been prepared for information purposes only and does not take into account your individual investment objectives, including the merits and risks involved in an investment in Navitas shares, or your financial situation or particular needs, and is not investment, financial product, legal, tax or accounting advice or opinion.

You must not act on the basis of any matter contained in this document, but must make your own independent investigation and assessment of Navitas and its shares and obtain any professional advice you require before making any investment decision based on your investment objectives and financial circumstances. An investment in Navitas shares is subject to investment and other known and unknown risks, some of which are beyond the control of Navitas, including possible delays in repayment and loss of income and principal invested. Navitas does not guarantee any particular rate of return or the performance of Navitas, nor does it guarantee the repayment of capital from Navitas or any particular tax treatment.

All information in this document is believed to be reliable, but no representation, warranty or guarantee, express or implied, is made by Navitas, its subsidiaries or their respective directors, officers, employees or agents, nor any other person (the “Beneficiaries”) as to the fairness, accuracy, completeness, reliability or correctness of the information, opinions and conclusions contained in this document (including, without limitation, any estimates, calculations, projections or forward looking statements). No action should be taken on the basis of the information, and no reliance may be placed for any purpose on the accuracy or completeness of the information or opinions contained in this document. To the maximum extent permitted by law, the Beneficiaries shall have no liability, including, without limitation, any liability arising from fault or negligence, for any direct or indirect loss or damage which may be suffered by any recipient through relying on anything contained in or omitted from this document.

The distribution of this document in other jurisdictions outside Australia may also be restricted by law and any such restrictions should be observed. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

This document does not constitute an offer, invitation, solicitation, advice or recommendation with respect to the issue, purchase or sale of any security in any jurisdiction. In particular, this document does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or to any "U.S. person" (as defined in the U.S. Securities Act of 1933 ("U.S. Securities Act")). Shares in Navitas have not been and will not be registered under the U.S. Securities Act, or under the securities laws of any state or other jurisdiction of the United States. Accordingly, shares in Navitas may not be offered or sold, directly or indirectly, in the United States or to, or for the account or benefit of, U.S. Persons, except in a transaction exempt from, or not subject to, the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This document may not be distributed or released in the United States or to, or for the account or benefit of, any U.S. person.

All references to dollars, cents or $ in this document are to Australian currency, unless otherwise stated.


Company profile

Navitas (ASX: NVT) is a leading global education provider that offers an extensive range of educational and training services for students and professionals across Australia and around the world

Market cap

~$1.8b

Annual revenue

$702.1m

Colleges/ schools

111

Staff headcount

~5,000

Students

> 80,000

University Programs - leading provider of pathway colleges and managed campuses

SAE Group - creative media education delivering qualifications in audio, film and multimedia

English - leading provider of migrant settlement services and English language programs

Professional (formerly Workforce) – providing quality vocational, higher education, employment and placement services. Active in health, psychology, security, recruitment and workforce.

Student Recruitment – recruiting students to universities in Australia, UK, USA, Canada


Total Group revenue up 4% to $355.4m

EBITDA up 5% to $59.9m

Net profit after tax $35.1m

Earnings per share 9.3¢

Fully franked interim dividend of 9.3¢

H1 FY13 Group highlights

Return to growth in University Programs enrolments

SAE earnings growth below expectations English earnings bounce back strongly Professional and Student Recruitment record

earnings losses Strategic and structural review of Navitas

completed and implementation underway

Operational

Revenue $355.4m

NPAT 35.1m

EPS 9.3¢

DPS 9.3¢


• The Parthenon Group engaged to facilitate Navitas strategic and structural review

• Findings affirm value of Navitas’ core business and identify growth opportunities

• Key structural outcomes:

Merging of Navitas Professional and Navitas English to leverage strong similarities

and create efficiencies. Merged Division to be known as Professional and English

Programs (PEP)

Student Recruitment Division to be incorporated into University Programs Division

Appointment of Chief Strategy Officer and redefinition of other senior roles

• Changes create three significant operating Divisions

All future external reporting to reflect new structure (UPD, SAE and PEP) –

commencing from FY13 Full Year Results

Strategic and structural review outcomes

FINANCIAL PERFORMANCE


Group performance summary

($m) H1 FY13 H1 FY12 Δ%

Revenue

Continuing business 347.9 339.3 3

New campuses* 7.5 2.5 200

Total 355.4 341.8 4

EBITDA

Continuing business 62.6 60.8 3

New campuses* (2.7) (3.7) (27)

Total 59.9 57.1 5 EBITDA Margin 16.9% 16.7%

NPAT ($m) 35.1 35.4 (1)

EPS (cents) 9.3 9.4 (1)

Full Year Dividend (cents) 9.3 9.4 (1)

*FY13: USA UP market expansion, ICRGU, EIC, NIC and SAE Chicago and Jakarta (FY12: USA UP market expansion, ICRGU, EIC, NIC and SAE Bochum, Chicago and Jakarta)


Core Divisions perform well

EBITDA ($m) H1 FY13 H1 FY12 Δ%

University Programs 53.1 49.2 8

SAE Group 12.6 11.8 7

English 7.1 0.8 788

Professional (2.5) 2.9 n/a

Student Recruitment (0.8) 0.7 n/a

Divisional EBITDA 69.5 65.4 6

Corporate costs (9.6) (8.3) 16

Group EBITDA 59.9 57.1 5


Long term growth

13% CAGR

18% CAGR

17% CAGR

217.4 270.2 291.4

341.8 355.4

H1 FY09 H1 FY10 H1 FY11 H1 FY12 H1 FY13

REVENUE ($m)

30.4

43.4 48.4

57.1 59.9


EBITDA ($m)

19.0

27.5 32.6 35.4 35.1


NPAT ($m)

55.2 52.8 21.2

50.4 13.6


1.9

13.0 5.0

8.7 2.8


2.5

8.5 5.1

2.8 (0.3)


PERIOD MOVEMENT


Consistent shareholder returns

14% CAGR

4% CAGR

14% CAGR

5.5

8.0 9.5 9.4 9.3


EARNINGS (cps)

8.6 6.1 4.9 5.2

10.1


OPERATING CASH FLOW (cps)

5.5

8.1 8.7 9.4 9.3


DIVIDENDS (cps)

0.5

2.6 0.6

0.7 (0.1)


0.8

2.5

1.5 (0.1) (0.1)


PERIOD MOVEMENT

2.5 (2.5 ) (1.2 ) 0.3

4.9



Balance sheet remains conservatively geared

1Cash realisation ratio = Net Operating Cashflow NPAT plus amtsn and depcn

Net debt $m

Net debt represents only 0.98x of rolling 12 months EBITDA ($129.6m)

Cash realisation ratio1 of 0.88x (H1 FY12: 0.46x)

Deferred revenue up 5% to $165.0m

NAVITAS – HALF YEAR RESULTS PRESENTATION – 31 DECEMBER 2011 – ASX: NVT

126.7

(37.7)

1.6

7.9

37.9

117.0

31-Dec-12

Operational cash flows

Other

Capex

Dividends

1-Jul-12

Debt constituents ($m)

Debt 178.8

Cash related to the Tuition Protection Service

(39.5)

Other Cash (12.7)

31-Dec-12 126.7


University Programs

Financial Performance Highlights

8%

8%

Revenue* $196.0m

EBITDA *

$53.1m

• Results still affected by policy changes in Australia

• Australian enrolments declined against pcp in 201203 but new enrolments grew by 7%

• UK performance improvement

• Continued strong performance in Canada and Singapore

• Start up losses substantially reduced in US

• Main US intake (Sept 2012) reported 103% increase in new enrolments

• Agreement for University of Canterbury, NZ college announced

* Several adjunct English businesses reclassified from English to UP for reporting


SAE


3%

7%

Revenue $55.6m

EBITDA $12.6m

• Australian earnings grew by 15%

• Impacted by sluggish results from some European schools

• No one-off profits from Licensing (H1 FY12: $0.5m)

• Title IV access in the US improves new student recruitment and halts decline in enrolments

• Includes start up losses of $0.9m

Pre-Acquisition period


English


788%

10% Revenue $64.1m

EBITDA $7.1m

• Significant improvement in Government

Programs

• pcp impacted by transition to new

contracts in July 2011 caused significant

disruption

• H1 FY13 returns to normal pattern

• ELICOS business now making small gains

off a low base

EBITDA $m


Professional (formerly Workforce)


186%

10% Revenue $30.2m

EBITDA ($2.5m)

• Strong performance in most education programs (ACAP, HSA, NCPS)

• Corporate training and Professional Year main source of decline

• Training services significantly restructured Over exposed to Government funding

and b2c market

Issue with student progression

New focus on mining/resources and b2b

• Professional Year remains profitable pcp experienced one-off spike due to

Government migration program changes


Student Recruitment


214%

10% Revenue $7.5m

EBITDA ($0.8m)

• SOL remains severely impacted by

cessation of the UK Post Study Work Visa

• EduGlobal impacted by foreign exchange


Corporate costs

Corporate Costs Highlights

Corporate costs $1.3m higher than pcp (H1 FY12: $8.6m)

• Provision for anticipated increases in FY13 EVA staff incentive payments

• Less favourable foreign currency translation outcomes

• Less than 3% of Group revenues

OUTLOOK


Sem 1203 sees UP enrolments return to growth

Equivalent Full Time Students (EFTSU): Semester enrolments

• 201203 EFTSU up 2% on pcp with trend set to continue: Largely due to returning stability in Australia and UK following regulatory changes

• 201203 Australian new student recruitment up 7%

Growth in new student recruitment anticipated to continue

9,21

0

9,02

0

12,2

68

11,5

73

12,0

25

15,4

19

14,3

06

14,5

29

17,8

11

15,7

24

14,6

75 17

,149

14,6

01

13,3

20

16,4

22

14,0

97

13,6

02

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

0702

0703

0801

0802

0803

0901

0902

0903

1001

1002

1003

1101

1102

1103

1201

1202

1203

% E

nro

lmen

t g

row

th

Equ

ival

ent

Full

Tim

e S

tud

ents

(E

FTS

U)

Semester


-1,000 -500 0 500 1,000

0-9

10-19

20-29

30-39

40-49

50-59

60-69

70-79

80-89

90+

Millions

263 million by

2025

Global market conditions positive

2.1 2.1 2.4 2.6 2.8 3.0 3.1 3.2 3.5

3.7 4.1

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

to

2024

2025

International student enrolments (m) 8.2

International education market share (%)

Source: , UNESCO Institute of Statistics, OECD Education at a Glance 2012

World population by gender

2010:3.45bn 2025: 3.99bn

Male Female

2010: 3.40bn 2025:3.95bn

2012


Outlook

University Programs • Growth against pcp expected in H2 FY13

New student recruitment in 201203 and 201301 expected to arrest earnings decline in Australia relative to pcp

UK and US results will continue to be strong compared to pcp

Growth in both Canada and Singapore moderating

Student Recruitment losses expected to continue in H2 FY13

SAE • SAE’s modest earnings growth in H1 FY13 is expected to be

repeated in H2 FY13 Australia and US to provide earnings momentum

Weakness in parts of Europe anticipated to continue in H2 FY13


Outlook

Professional and English Programs • Second half earnings projected to be greater than H1 FY13

Losses stemmed in Professional

English performance is not expected to be as strong as first half

Corporate costs • Expected to rise in H2 FY13 and beyond partly due to restructure • Efficiencies sought at divisional level • Anticipated to remain steady at less than 3% of revenue

H2 FY13 tax and depreciation expense to be lower than H1 FY13 All factors should support some improvement in FY13 with more significant growth from FY14

APPENDIX


Corporate snapshot

375.4m Shares on issue

$1.8b Market Capitalisation

ASX200

52 wk range

Annualised dividend

$4.70 Share Price 31 December 2012

NVT

$2.83 - $4.70

19.5cps


Detailed H1 P&L – 5 years

H1 FY09 H1 FY10 H1 FY11 H1 FY12 H1 FY13 $000s Index CAGR

University Programs 129,660 162,763 182,713 182,021 196,040 14,019 108% 11%SAE Group - - - 57,063 55,594 (1,469) 97% n/aEnglish Language 59,956 71,227 68,633 58,371 64,144 5,773 110% 2%Workforce & Training 14,969 22,584 26,582 33,713 30,245 (3,468) 90% 19%Student Recruitment 11,061 11,918 10,675 8,636 7,466 (1,170) 86% -9%Corporate & consolidation items 793 1,126 2,095 1,863 1,350 (513) 72% 14%

216,439 269,618 290,698 341,667 354,839 13,172 104% 13%

(186,038) (226,220) (242,321) (284,530) (294,965) (10,435) 104% 12%

30,401 43,398 48,377 57,137 59,874 2,737 105% 18%

(2,415) (3,302) (3,825) (6,233) (7,039) (806) 113% 31%

27,986 40,096 44,552 50,904 52,835 1,931 104% 17%

(502) (488) (2,603) (488) (488) - 100% -1%

27,484 39,608 41,949 50,416 52,347 1,931 104% 17%

246 441 390 (4,085) (3,802) 283 93% n/a

27,730 40,049 42,339 46,331 48,545 2,214 105% 15%

(8,955) (12,807) (10,122) (10,938) (13,242) (2,304) 121% 10%

18,775 27,242 32,217 35,393 35,303 (90) 100% 17%

228 272 355 (33) (233) (200) 706% n/a

19,003 27,514 32,572 35,360 35,070 (290) 99% 17%

NAVITAS LTDPCP Change

Operating Revenue

Total operating revenueExpenses

EBITDA

Income tax

NPATOutside equity interestNPAT attributable to Navitas

Depreciation

EBITAAmortisation

EBITNet Interest (paid)/received

Net profit before tax

navitas fy13 interim results presentation

Investor Relations