navitas fy14 interim results presentation

Shaping the

FutureShaping

the Future

FY14 INTERIM RESULTS

For the half year ended 31 December 2013

ASX:NVT

Navitas FY14 Interim Results Presentation – 31 December 2013 - 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 documentshould 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.

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

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

Market cap

$2.41b

Market cap

$2.41b

Annualised revenue

$795.3m

Annualised revenue

$795.3m

Colleges/schools

115

Colleges/schools

115

Staffheadcount

~5,500

Staffheadcount

~5,500

Students

> 80,000

Students

> 80,000

University Programs - leading provider of 32 pathway colleges and managed campuses across Australia and in the UK, US, Canada, Singapore, Kenya, New Zealand and Sri Lanka

SAE - creative media education provider delivering vocational and higher education qualifications in audio, film and multimedia via 58 colleges in Australasia, US, Europe and the Middle East

Professional and English Programs – provides vocational training, higher education and placement services in areas of key demand across Australia as well as providing English as a second language courses for international students and English language, settlement and work preparation programs for migrants and refugees

Company Profile

3


Group • Revenue up 19% to $421.9m• 6% increase in EBITDA to $63.2m• Net profit after tax up 3% to $36.1m• Interim dividend of 9.4 cents per share

University Programs • Revenue up 20% to $243.2m following enrolment growth in all key regions and significant fee growth

• 12% increase in EBITDA to $58.4m with margins impacted by sales and marketing enhancements

• Two new colleges openedSAE • 22% increase in revenue following improvement in US

and Germany – 11% post favourable FX impact• EBITDA down to $9.0m due to investment in US

operations, staff capacity, systems and processesProfessional and English Programs

• Continued growth provides 15% revenue increase to $108.1m and 134% EBITDA growth to $11.0m

• ACAP increases EBITDA by more than 50%

FY14 Interim Result Highlights

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Financial Performance


Group performance summary

($m) H1 FY14 H1 FY13 ∆%

Revenue

Continuing business 419.7 347.9 21

New campuses* 2.2 7.5 (70)

Total 421.9 355.4 19

EBITDA

Continuing business 65.5 62.6 5

New campuses* (2.3) (2.7) (15)

Total 63.2 59.9 6

EBITDA Margin 15.0% 16.9%

NPAT ($m) 36.1 35.1 3

EPS (cents) 9.6 9.3 3

Interim Dividend (cents) 9.4 9.3 1

*H1 FY14: EIC, NIC, UCIC, BCUIC and SAE Chicago and Jakarta (H1 FY13: USA UP market expansion, ICRGU, EIC, NIC and SAE Chicago and Jakarta)

Investment in new businesses continues

6


58%16%

26%UP

SAE

PEP

67%8%

7%

6%5%

7% AustraliaUKEuropeCanadaUSAROW

Core Divisions perform well in 1st half

Revenue($m) H1 FY14 H1 FY13 ∆%

University Programs 243.2 203.5 20

SAE Group 68.1 55.6 22

Professional and English Programs 108.1 94.4 15

Divisional revenue 419.4 353.5 19

Other 2.5 1.9 32

Group revenue 421.9 355.4 19

Strong revenue growth across all segments

$419.4m

7

$419.4m

Divisionalrevenue

by region


75%

11%

14%UPSAEPEP

75%

18%

7%

Core Divisions perform well in 1st halfEBITDA impacted by investment for the future

EBITDA ($m) H1 FY14 H1 FY13 ∆%

University Programs 58.4 52.2 12

SAE Group 9.0 12.6 (29)

Professional and English Programs 11.0 4.7 134

Divisional EBITDA 78.4 69.5 13

Corporate costs (15.2) (9.6) 58

Group EBITDA 63.2 59.9 6

$69.5m

H1 FY13 DivisionalEBITDA

$78.4m

H1 FY14DivisionalEBITDA

8


Track record of compound annual growth (CAGR)

21.5%CAGR21.5%CAGR

16.3%CAGR

16.3%CAGR

14.4%CAGR

14.4%CAGR

Strong record of consistent growth…

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108.0

137.2162.2

217.4

270.2291.4

341.8355.4

421.9

Revenue ($m)

22.024.9

28.530.4

43.4

48.4

57.159.9

63.2

EBITDA ($m)

14.115.1

16.5

19.0

27.5

32.6

35.4 35.136.1

NPAT ($m)


1.5 1.6

6.1

8.6

6.1

4.95.2

10.1

11.4

Operating cashflow (cps)

13.1%CAGR13.1%CAGR

33.7%CAGR

33.7%CAGR

10.4%CAGR10.4%CAGR

…translating into solid returns for shareholders

10

4.1 4.34.8

5.5

8.0

9.5 9.4 9.39.6

Earnings (cps)

4.74.3

4.7

5.5

8.1

8.7

9.4 9.3 9.4

Dividends (cps)


1Cash realisation ratio= Net Operating CashflowNPAT plus amtsn and depcn

Net debt $m Cash realisation ratio1 of 0.93x (H1 FY13: 0.88x)

Deferred revenue up 30% to $214.1m

Net debt represents only 0.82x of rolling 12 months EBITDA ($133.3m)

Debt composition ($m) 31-Dec-13

31-Dec-12

Debt 185.5 178.8

Cash related to the Tuition Protection Service

(64.6) (39.5)

Other Cash (12.1) (12.7)

31–Dec 108.8 126.7

Strong cash generation continues to reduce debt

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108.8

(0.8)

(42.7)

9.2

9.9

38.3

94.9

31-Dec-13

Other

Operational Cashflows

FX Translation charge

Capex

Dividends Paid

1-Jul-13


University ProgramsFinancial Performance Highlights

EBITDA *• Underlying revenue up 16% (10% volume and 6% avg price) after adjusting for FX movements

• Enrolment growth in all key regions; US (45%), UK (23%), Canada (21%), Aus (13%)

• US colleges reach operational breakeven

• UC International College (New Zealand) and Birmingham City University International College (UK) opened

• La Trobe University Sydney Campus contract extended for 10 years

• Outstanding academic outcomes with 95% progression rates

• Discussions with new potential partners ongoing

University Programs

12

20%

12%

Revenue$243.2m

EBITDA *

$58.4m

43.5

53.649.9

52.258.4

H1 FY10 H1 FY11 H1 FY12 H1 FY13 H1 FY14

EBITDA $m


SAEFinancial performance) Highlights

• Underlying revenue up 11% after adjusting for FX movements

• Strong A$ revenue growth led by US (69%) and German (35%) operations

• Earnings impacted by investments in US operations, staff capacity, systems and processes

• Australian operations moderate following period of solid growth

• New York college relocated

• New Chicago college opened; recently granted Title IV funding

• Strong underlying growth demonstrated by revenue improvement

SAE

13

23%

29%

Revenue$68.1m

EBITDA$9.0m

Pre-Acquisition period

11.812.6

9.0


EBITDA $m


Professional (formerly Workforce)Financial performance Highlights

• Record performance with increases in revenues and earnings boosted by weak pcp

• Return to normalised earnings levels

• Improvement largely from ACAP and English and Foundation Skills (formerly Government Programs)

o ACAP increases earnings by more than 50% following significant student growth

o English and Foundation Skills increases client numbers and hours against pcp

• Key government contracts due for renewal on 1 July 2014, government holds 3 year extension option

Professional and English Programs

14

134%

15% Revenue$108.1m

EBITDA$11.0m

9.5

5.03.7

4.6

11.0


EBITDA $m


Corporate costs

EBITDA ($m) Highlights

• Corporate costs rise due to investment in business for future growth

• Increases in EVA incentive payments as Group performance improves

• Increase in lease costs associated with surplus space at Wynyard Green

o Wynyard Green vacancies being rationalised with Navitas businesses

o Higher capex to be offset by lower lease costs and operational efficiencies

• Charges from the marking to market of FX hedging book

Corporate costs

15

-9.7-10.2

-8.3-9.6

-15.2



Outlook


UP enrolment trend continues to improveUniversity Programs Equivalent Full Time Students Units (EFTSU): Semester enrolments

• 13% semester 3 2013 EFTSU growth against pcp• All key regions showing good growth• Australian new student enrolments up more than 30% in semester 3 2013

Recovery continues to strengthen…

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University Programs

• Recent student enrolment increases to benefit in H2 FY14 and beyond

• H2 FY14 growth vs pcp to exceed H1 FY14

• Impact from investments to continue throughout FY14

SAE

• Strong revenue growth indicating improvement trend

• Expecting stronger H2 though FY14 result will be flat, or lower, than pcp

• US operations expected to record small profit following H1 EBITDA loss of $2m

Professional and English Programs..supporting solid growth momentum in FY14…

18


Professional and English Programs

• Full year growth anticipated but lower H2 than pcp

• ACAP and English and Foundation Skills to moderate off higher comparatives

• Key government contracts due for renewal, government holds 3 year extension options

Navitas

• Corporate costs to rise but remain at ~3% of revenues

• FY14 EBITDA guidance reaffirmed at $138m to $148m

• Dividend Reinvestment Plan commencing for FY14 interim dividend

Professional and English Programs…and reaffirming guidance

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Appendix


Financial metrics vs Campus size

Campus size (# of students)

10%

20%

30%

40%

Royalty payments (Variable)

1,000 2,000 3,000

Agent commissions (Variable)

Teaching costs (Semi‐variable)

% of reven

ue

NewCampus

EstablishedCampus

50%

Indicative EBITDA Margin

• Strong operating leverage as student numbers increase

• Low capital requirementso leverage partner universities

infrastructure and spare teaching capacity

o fees received in advance drives negative working capital

Marketing & Admincosts (Semi‐fixed)

Profitable and highly capital efficient model

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Navitas Limited Citi Australian Growth Conference 21 May 2013 ASK:NVTNavitas FY14 Interim Results Presentation – 31 December 2013 - ASX:NVT

16.5

13.0

6.3

6.26.14.7

47.2

USA

UK

GER

France

Australia

Canada

ROW

263million by2025

263million by2025 165

98Current enrolments

Enrolment growth

International student enrolments (m)

International education market share (%)

Source: UNESCO Institute of Statistics, OECD Education at a Glance 2013, ICEF

2011

Global tertiary enrolment (m)

Global market conditions remain positive

Supply imbalance in key source markets (m)China

9.57 9.33 9.15

6.57 6.75 6.85

2010 2011 2012

Gaokao students

China domesticuniversity places

2.1 2.4 2.6 2.8 3.0 3.1 3.2 3.5 3.7 4.1 4.3

8.2

22

*

• Chinese university entrance exam


Section titleto go here


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Corporate snapshot

375.4mShares on issue

$2.41bMarket Capitalisation

ASX100

52 wk range

Annualised dividend

$6.43Share Price31 December 2013

NVT

$4.60 - $6.47

19.5cps

24

Corporate snapshot


Detailed H1 P&L – 5 years

25

Detailed P&L – 5 years

Navitas Ltd$000s H1 FY10 H1 FY11 H1 FY12 H1 FY13 H1 FY14 $000s Index CAGR*

Operating RevenueUniversity Programs 174,681 193,388 190,657 203,506 243,208 39,702 120% 9%SAE - - 57,063 55,594 68,130 12,536 123% n/aPEP 93,811 95,215 92,084 94,389 108,070 13,681 114% 4%Corporate & consolidation items 1,126 2,095 1,863 1,350 1,149 (201) 85% 1%

Total operating revenue 269,618 290,698 341,667 354,839 420,557 65,718 119% 12%Expenses (226,220) (242,321) (284,530) (294,965) (357,346) (62,381) 121% 12%EBITDA 43,398 48,377 57,137 59,874 63,211 3,337 106% 10%Depreciation (3,302) (3,825) (6,233) (7,039) (9,634) (2,595) 137% 31%EBITA 40,096 44,552 50,904 52,835 53,577 742 101% 8%Amortisation (488) (2,603) (488) (488) (375) 113 77% -6%EBIT 39,608 41,949 50,416 52,347 53,202 855 102% 8%Net Interest (paid)/received 441 390 (4,085) (3,802) (3,509) 293 92% n/aNet profit before tax 40,049 42,339 46,331 48,545 49,693 1,148 102% 6%Income tax (12,807) (10,122) (10,938) (13,242) (13,602) (360) 103% 2%NPAT 27,242 32,217 35,393 35,303 36,091 788 102% 7%Outside equity interest 272 355 (33) (233) (11) 222 5% n/aNPAT attributable to members 27,514 32,572 35,360 35,070 36,080 1,010 103% 7%

* Cumulative Annual Growth Rate from H1 FY10 to H1 FY14

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