Asset sale puts Navitas back in the black

Global education business Navitas has returned to profit after navigating the challenges of COVID-19, with the bottom line boosted by an asset sale.

Perth-based Navitas is one of Western Australia’s top 10 private companies by revenue, a position it is likely to hold despite annual revenue slipping to $770 million for the year ending June 30 2022, down from $816 million in the previous corresponding period, according to the annual report of its parent Marron Group Holdings.

Despite the fall in revenue, Marron’s records showed a profit for the group of $54.8 million for the most recent financial year, coming back from a loss of $78 million the in the 12 months prior. 

The business, which employs more than 5,500 staff, also made a $80.2 million loss in the year ending June 30 2020, a period during which the pandemic started, although CEO Scott Jones pointed out that the company's key metric, earnings before interest, tax, depreciation and amortisation (EBITDA), had remained positive throughout the pandemic.

EBITDA was $318.6 million in the the past financial year ($109.1 million after accounting for divestments and lease adjustments) compared to $219 million the year before ($166.5 million after adjustments). 

Mr Jones said high levels of demand were reflected in a strong global pipeline  which was the biggest Navitas has seen and which largely excludes China due to its continued trouble with Covid restrictions.

He said he expected Navitas to return to pre-Covid levels of new students in this financial year.

"We are well positioned for strong and sustainable post-pandemic growth, driven by strong demand for our pathway programs and an increased focus on our managed campus offering," Mr Jones said.

For the 2021-22 financial year, the business returned to net profit on the back of a $226 million sale of its SAE creative media institute operations in Europe and the UK, which contributed a $152 million net gain on divestments and took the business to a pre-tax profit of $12.5 million. In effect, the sale of assets it says represent less than 10 per cent of its business has largely covered the losses endured due to COVID, which resulted in international travel restrictions and severe lockdowns that severely affected the business.

The final profit was then further boosted by a $42 million net tax benefit due to the application of a $47.2 million deferred tax benefit.

“The group has shown strong resilience in a challenging operating environment and is well positioned for a strong and sustainable post-pandemic growth,” the Marron Group directors’ report stated.

"Whilst 2022 has again been a year significantly impacted by the pandemic, the group has responded to every challenge presented and remains in a strong position for future growth," the directors added.

The directors report pointed out that Navitas had signed a 10-year partnership with the UK’s Keele University to establish a new college, struck another long-term strategic partnership with Birmingham University which is also in the UK and renewed a 10-year partnership with La Trobe University in Victoria.

It had also announced new campus launches at Curtin University-linked Curtin College and Curtin Singapore.

Since the end of the financial year, the group had also repaid $95 million in debt. 

However, the directors acknowledged that COVID had continued to affect the group’s operations and financial performance throughout 2022 with restrictions on travel by international students into Australia particularly notable.

“The extent of the impact varied by business and geography, with continued border restrictions in Australia for the majority of FY22 significantly affecting performance in our pathways business in that market,” the directors stated.

“Similarly, our pathways business in North America continued to be impacted by COVID-related challenges, including the slow recovery of student flows from China and the significant delays in student visa approvals.

“The European university pathway division performed very strongly in FY22, as a result of predominantly open borders and positive policy settings throughout the pandemic.

“The group’s diversified portfolio and geographic spread remained a strength, with international managed campuses (such as Curtin Singapore and Murdoch Dubai) performing well and providing appealing alternatives to traditional markets.

“The group’s careers and industry division, which includes higher and vocational education, and delivery of language and employability programs, benefited from its domestic focus and has performed strongly across the board, with growth in some areas.”

In commenting on the forecast for the business the directors were positive.

"The group’s key university pathway markets remain attractive destinations for international students as the global education sector rebounds. Favourable regulatory settings in our key markets, together with a reputation for high quality education, high vaccination levels and a safe and friendly living environment, underpin their appeal for international students," the directors' report stated.

"Sustained demand for our programs in Europe, coupled with increasing numbers of international students returning to Australia and North America, and a strong application pipeline, are strong indicators of anticipated performance in FY23.

"Sentiment in the most recent Navitas Agent Perception Survey supports this forecast."

Founded in WA in 1994 by Rod Jones and Peter Larsen, Navitas was listed on the ASX in the early 2000s before Mr Jones backed a takeover led by Australian private equity giant BGH Capital in 2019. Mr Jones remains involved and his son, Scott, is CEO.