Navitas says higher costs to limit profit

Education services provider Navitas has forecast a 10 per cent lift in its underlying profit for the 2014 financial year, warning that its costs will be higher as it carries out a broad restructure.

Navitas today provided earnings before interest, taxes, depreciation and amortisation guidance of between $138 million and $148 million for FY14.

The mid-point of this range represents a 10 per cent increase on the company's last financial year EBITDA of $130 million.

Navitas chief executive Rod Jones said while it was not the company's usual practice to provide earnings guidance, it was an appropriate time to ensure shareholders were informed of the company's near-term earnings prospects.

"For the quarter ended 30 September 2013, we have recorded stong revenue growth across all divisions with group revenues up by approximately 15 per cent on the prior year," Mr Jones said.

"However, we are continuing to invest heavily in systems, people and processes to enhance our capability to achieve future earnings in growth and this will impact current year margins."

Navitas said its costs were likely to be higher as the company implements recommendations flowing from a strategic and structural review in 2012, including new corporate appointments and the implementation of a new student management system.

Higher property costs as a result of surplus lease space at its central Sydney English language school, and the return to more normal salary-at-risk payments were also likely to have an impact on costs.

"The resulting increase to our fixed cost base will have a short-term adverse impact in FY14, but with the company once again recording strong revenue growth it is more important than ever that we continue to invest for the future," Mr Jones said.

The company separately announced a 25 per cent growth in full-time student unit enrolments for the third semester of 2013 at its Northern Hemisphere university programs division, with particularly high growth in the US. 

Navitas shares were down 9.2 per cent at $5.71 at 10:40AM WST.