Investors punished education group Navitas (NVT) yesterday, selling down the shares by around 10% after it reported a sharp drop in half year earnings.
But unlike another listed education services group Vocation (VET), Navitas reported positive earnings which were a bit better after one-off items were stripped out.
The company reported a net profit of $31.3 million in the six months to December 31, down from the $36.1 million result for the December half of 2013.
But with those one-off goodwill write-downs excluded, profit was up 12% to $40.4 million, thanks, Navitas said, to strong growth across its University Programs and the Professional and English Programs divisions.
Navitas shares fell 8.7%, to $4.79 – the shares had earlier been down by more than 10%, and the gain was trimmed by the surge after the rate cut from the RBA.
NVT 1Y – Navitas slips as profit slides
Navitas said it was on track to deliver full-year underlying earnings of $162 million to $172 million, but expects earnings from its University Programs business to grow in the second half of 2014-15 at a slower rate, as enrolments moderate in the UK and Australia.
Chief executive Rod Jones pointed to Navitas’s 14% increase in revenue to $480.5 million in the half year.
“This has been a period of solid revenue growth across all divisions and margin improvement for University Programs and Professional and English Programs," he said yesterday.
Interim dividend of 9.4c a share was left unchanged, a move which tells us the board is uncertain about the rest of the financial year.
"While we face headwinds, and a tightening global economy, all three divisions are expecting growth in [fiscal 2015] and will continue to progress strategic opportunities for the longer term as we strive to meet education and training needs in a global knowledge economy,” Mr Jones said.
Navitas pointed to a $9 million goodwill impairment in relation to its contract with Macquarie University for the fall. Navitas said Macquarie University confirmed its intention to not renew its campus agreement, but discussions on a replacement program were proceeding positively.
Navitas also said yesterday that it saw a good chance that the UK tax tribunal will rule in its favor on appeal in a dispute with Revenue & Customs as to whether the subsidiary provides exempt education for the purposes of UK value added tax.
