Global education player Navitas hopes it can finally shake the impact of Covid after a big net loss.
Global education player Navitas blamed Covid for continuing impact on its financial and operational performance, but believes it is on the cusp of a return to profitability.
The Perth-based group revealed, through the annual report of its parent Marron Group Holdings, a net loss of $131 million on revenue of $780.6 million for the year ending June 30, going into the red after a $54.8 million net profit the previous corresponding period on revenue of $770 million.
However, in its annual report Navitas emphasised that previous year’s revenue and profitability were boosted by a $152 million divestment of its SAE creative media institute operations in Europe and the UK.
Navitas said its operational earnings, were positive at $138.1 million, down from $318.6 million. Adjusted for divestments, acquisitions and lease accounting, it said earnings before interest, tax, depreciation and amortisation was $90.6 million, a fall of just over 1 per cent year on year.
Speaking from Thailand where he was leading the firm’s annual business partners conference, Navitas chief executive Scott Jones said the enterprise was expecting to be back in the black for 2023-24 as the current financial year saw the full revival of the Australian market, representing around 70 per cent of its overall business.
Mr Jones said that in the 2022-23 financial year, its Australian operations had represented about half what was typically expected of it, with enrolments only picking up from the start of the academic year in March and, even then, without the full thrust of the Chinese market which delayed opening until April.
“We are starting to see for the first time since Covid the Australian market bouncing back,” he said.
Despite the pandemic's long impact, hitting a year after a private-equity backed management buyout, Mr Scott said the business model had proved resilient and the group had doubled down on investment over the period, as well as taking the opportunity to cut some costs.
Furthermore, he said that even with the Australian business getting back to full steam, it was not drawing students away from new growth areas, signalling that the global market was bigger than pre-pandemic levels and Navitas was taking a greater share of it with new operations.
He said 12 new geographic centres had done well, backing the company’s decision to expand despite the Covid shut downs.
The company also noted greater diversity in its base, as one of the positive legacies of the pandemic. For the first time, India overtook China to become its biggest recruitment market.
Mr Jones said that enrolment growth was primarily driven in the past year by offshore campuses in locations such as Singapore, the UAE and Sri Lanka.
He said Singapore, where it owns the Curtin Singapore operation, had quadrupled in enrolments, leading a host of new hotspots for the group as traditional, and more profitable, markets such as Australia and Canada awaited a revival of their fortunes.
During the year, Navitas also acquired the Study Group Australia group for consideration of $121.7 million. The acquisition includes interests in Taylors College Sydney and University of Waikato College in New Zealand.
Previously ASX-listed Navitas was privatised in 2019 through a private equity-led buyout which involved the family office of the firm’s co-founder Rod Jones, who ran the business for many years and is father of the current chief executive.
The Jones family represent 11 per cent of Navitas equity, with Australian private equity giant BGH Capital holding about 30 per cent and the rest owned by a collection of Australian and foreign superannuation and investment funds.
Net assets in the business were valued at $742.7 million, according to the annual report, down from $886.4 million.
As a result of the buyout, the business has borrowings of about $1.5 billion. Interest on this debt was the main reason that its operational profit became a net loss.
“It is not concerning to us,” he said.
“No one wants to pay that level of interest but in terms of operational performance we have plenty of liquidity.”