Shaping the Future… · 2014-06-17 · Source: OECD Education at a Glance 2013, ICEF . 2011 . Global drivers – favouring western countries . 8 . English language western countries

Shaping the

Future Shaping

the Future

UBS Education Sector Conference

26 March 2014

ASX:NVT

Navitas UBS Education Sector Conference presentation – 26 March 2014 - ASX:NVT

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2


Colombo Plan introduced to

sponsor, primarily Asian

students, to study in Australia

- Full fee international

student programs commence in

1986 - 4,250

international students in

Australia

- 40,000 international students in

Australia

- Industry becomes more sophisticated

and enters strong growth

phase

- ~ 600,000 students in Australia by

2010

1950 1985 1990 2000 2010

International student

retention rates start to

decrease

Students usually

sponsored by

government

Students fund their own fees

Navitas founded

Australia - an international education pioneer

International education generates

$18b in export revenue

3


165

98 Current enrolments

Enrolment growth

263 million by

2025

Source: UNESCO Institute of Statistics

Global tertiary enrolment (m)

Global drivers – demographic growth

Significant global growth in the number of students entering tertiary education

4


9.57 9.33 9.15

6.57 6.75 6.85

2010 2011 2012

Gaokao students

China domesticuniversity places

Source: OECD Education at a Glance 2013, Global Times 2013

Global drivers – supply imbalance

Chinese students sitting the university entry exam (Gaokao) vs Chinese domestic university places (m)

5

Emerging economies focus on improving primary and secondary education infrastructure first – creating supply imbalance

In addition at least 10% of high school

students don’t take the

Gaokao and instead focus

on gaining entry to foreign

universities


The middle class: size and distribution (millions of people)

Source: Hitting the sweet spot, Ernst & Young 2013

Global drivers – emerging middle class

6

Emerging economies growing middle class fastest – education a priority


2.1 2.4 2.6 2.8 3.0 3.1 3.2

3.5 3.7 4.1 4.3

8.2

International student enrolments (m)

Source: OECD Education at a Glance 2013, ICEF

Global drivers – enable study overseas

Increasing number of students choosing to study overseas – forecast to keep growing significantly

7


16.5

13.0

6.3

6.26.14.7

47.2

USA

UK

GER

France

Australia

Canada

ROW

International education market share (%)

Source: OECD Education at a Glance 2013, ICEF

2011

Global drivers – favouring western countries

8

English language western countries favoured for international education – Navitas positioned well in top locations


• Based in Perth, Navitas was founded in 1994 with the goal of helping more international students succeed at university in Australia

• International students were failing due to issues relating to studying in a different country - culture, education system and language

• Navitas addressed this problem via: o Three trimester academic year

o Improved student support

o Small class sizes with highly interactive teaching model

o Additional teaching hours delivered in block format

• Consolidation of ownership followed by listing on the ASX in 2004

• Founding shareholding reduced since listing by dilution and progressive selldown – now at ~40%

Navitas history

9


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

$2.72b

Annualised revenue

$795.3m

Colleges/ schools

115

Staff headcount

~5,500

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

2014 Company Profile

10


Track record of compound annual growth (CAGR)

21.5% CAGR

16.3% CAGR

14.4% CAGR

Strong record of consistent growth…

11

108.0

137.2 162.2

217.4

270.2 291.4

341.8 355.4

421.9

H1 Revenue ($m)

22.0 24.9

28.5 30.4

43.4

48.4

57.1 59.9

63.2

H1 EBITDA ($m)

14.1 15.1

16.5

19.0

27.5

32.6

35.4 35.1 36.1

H1 NPAT ($m)


1.5 1.6

6.1

8.6

6.1

4.9 5.2

10.1

11.4

H1 Operating cashflow (cps)

13.1% CAGR

33.7% CAGR

10.4% CAGR

…translating into solid returns for shareholders

12

4.1 4.3 4.8

5.5

8.0

9.5 9.4 9.3 9.6

H1 Earnings (cps)

4.7 4.3

4.7

5.5

8.1

8.7

9.4 9.3 9.4

H1 Dividends (cps)


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 Δ%

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

13

$419.4m

Divisional revenue

by region


75%

11%

14% UPSAEPEP

75%

18%

7%

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

EBITDA ($m) H1 FY14 H1 FY13 Δ%

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 Divisional EBITDA

$78.4m

H1 FY14 Divisional EBITDA

14

Shaping the

Future Shaping

the Future

University Programs

15


• Birmingham

• Singapore

South East Asia

• Nairobi

• Perth • Adelaide • Brisbane • Melbourne • Sydney • Christchurch

Australia/NZ

• Boston • Dartmouth • Lowell • Bowling Green • Durham • Vancouver • Winnipeg

North America

• Cambridge • Hertfordshire • London • Plymouth

• Portsmouth • Swansea • Aberdeen • Edinburgh

United Kingdom

Africa

• Colombo

Sri Lanka

32 UP colleges across 8 countries

16


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)

% o

f rev

enue

New Campus

Established Campus

50%

Indicative EBITDA Margin

• Strong operating leverage as

student numbers increase • Low capital requirements

o leverage partner universities infrastructure and spare teaching capacity

o fees received in advance drives negative working capital

• Steady price growth as student

fees linked to partner university fee structures

Marketing & Admin costs (Semi-fixed)

Profitable and highly capital efficient model

17


University Programs Equivalent Full Time Students Units (EFTSU): Semester enrolments

• 11% semester 1 2014 EFTSU growth against pcp • Highest UP enrolment ever – 6% up on prior peak of 201001 • All key regions showing good growth

Recovery momentum continues to build

18


• Australia – new students

o ~25% increase in international student recruitment from source countries

o ~12% growth in domestic recruitment and slightly larger decline in international students recruited in Australia – balance is -3%

o Domestic and international students recruited in Australia comprise ~50% of cohort

• Despite 12 months of growth Australian enrolments still down 13% on 201001 peak, even with new colleges/campuses

• Asia/Africa region down 12% - relatively small financial impact

Aus 11%* Canada

17%* UK 19%* US 36%*

All key regions showing good growth

*Sem 1 2014 compared to pcp

19


Financial 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 H1 FY14 Results

20

20%

12%

Revenue $243.2m

EBITDA *

$58.4m

43.5

53.6 49.9

52.2 58.4

H1 FY10 H1 FY11 H1 FY12 H1 FY13 H1 FY14

EBITDA $m

Navitas Limited Citi Australian Growth Conference 21 May 2013 ASK:NVT Navitas UBS Education Sector Conference presentation – 26 March 2014 - ASX:NVT

SAE

21


• Berlin • Cologne • Frankfurt • Bochum

• Munich • Hamburg • Leipzig • Stuttgart

• Geneva • Zurich • Ljubljana • Stockholm

• Singapore • Jakarta • Chennai • Mumbai • Kuala Lumpur • Bangkok

Asia

• Cape Town

• Perth • Adelaide • Brisbane • Byron bay • Melbourne • Sydney • Auckland

Australia/NZ

• Atlanta • Los Angeles • Miami • Nashville • New York • San Francisco • Chicago • Mexico city

North America

• London • Glasgow • Liverpool • Oxford

United Kingdom

Africa

Europe

• Athens • Milan

• Madrid • Vienna • Brussels • Paris

• Istanbul • Amsterdam • Rotterdam • Barcelona

53 campuses in 27 countries

22

23

24

25

26

27

28


8,258 FTE

Feb 2014

7,543 FTE*

Feb 2013

9%

• FTE growth across all regions • US continues to improve following

significant investment • German growth driven by new Bochum

campus • Athens, Geneva, Amsterdam and

Stockholm driving European growth

*FTE – Full Time Equivalent ^ Southern region includes Australia, New Zealand, Indonesia and South Africa

Ongoing student growth

29


Financial 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 H1 FY14 Results

30

23%

29%

Revenue $68.1m

EBITDA $9.0m

Pre-Acquisition period

11.8 12.6

9.0


EBITDA $m


Professional and English

Programs

31


Professional and English Programs

English and Foundation

Skills

Careers and Learning

Skills

Navitas Professional

Institute

Training and Development

Delivers government

programs including the Adult Migrant English Program,

Language, Literacy and Numeracy

Program and the Humanitarian

Settlement Service

Prepares students for further

learning and employment.

Includes general and academic

English programs as well as intern and employment

programs

Focuses on building capacity,

core skills and employee

effectiveness in the Resources

sector and related industries

Delivers vocational and

higher education programs to build

and enhance careers. Includes

the Australian College of Applied Psychology, Health Skills Australia and

the Navitas College of Public

Safety

Domestically focused with significant diversity

32


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

Professional and English Programs H1 FY14 Results

33

134%

15% Revenue $108.1m

EBITDA $11.0m

9.5

5.0 3.7

4.6

11.0


EBITDA $m


Outlook


University Programs

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

• H2 FY14 growth vs pcp to exceed H1 FY14

SAE

• Strong revenue growth indicating improving trend

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

• US operations expected to break even following H1 EBITDA loss of $2m

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 on 1 July 2014

Solid growth momentum in FY14…

35


• Corporate costs to rise as Navitas builds platform for growth – will remain at ~3% of revenues

• Major investments in:

o Appointment of senior staff to increase capacity for ongoing growth

o Evolution of sales and marketing model

o New systems and processes

• Additional costs include:

o EVA staff incentive increases

o Leasing and property costs and

o Unfavourable hedging charges

• FY14 EBITDA guidance, provided in Oct 2013, maintained at $138m to $148m

…maintains FY14 guidance

36


Appendix


Corporate snapshot

375.4m Shares on issue

$2.72b Market Capitalisation

ASX100

52 wk range

Annualised dividend

$7.43 Share Price 28 February 2014

NVT

$4.80 - $7.59

19.5cps

38

Corporate snapshot


Detailed H1 P&L – 5 years

39

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

PCP Change

Documents

Shaping the Future… · 2014-06-17 · Source: OECD Education at a Glance 2013, ICEF . 2011 . Global drivers – favouring western countries . 8 . English language western countries