Unfortunately for its shareholders the Navitas Limited (ASX: NVT) share price is heading in the wrong direction once again.
In morning trade the education provider's shares are down 11% to $4.44 following the release of its full-year results.
Here are highlights from today's release:
- Revenues from ordinary activities down 5.5% to $955.2 million.
- Group EBITDA margin flat at 16.3%.
- Profit after tax from ordinary activities down 10.8% to $80.3 million.
- Reported earnings per share down 8% to 22.1 cents.
- Final 2017 dividend (to be paid 15 September 2017) of 10.1 cents per share.
- Underlying student enrolments up 5%.
- Pass rates of 82%.
What happened?
While there were numerous reasons why revenue sank this year, management has blamed it primarily on the closure of two University Partnership colleges.
As the University Partnership segment is its biggest contributor of revenue by some distance, its underperformance is felt throughout the whole company's results unfortunately.
This ultimately offset an improved performance from its SAE and Professional and English Programs segments.
Unfortunately things look likely to get worse before they get better due to the changes the company announced previously to the government's AMEP tender.
The reduction in AMEP delivery centres will decrease the Professional and English Programs segment's EBITDA by $14 million in FY 2018 according to management.
This is at the high end of its previous guidance and the equivalent of 45% of the segment's EBITDA this year.
Should you invest?
Overall I felt this was another disappointing year for Navitas and I can't say I'm surprised to see its shares tumble lower.
Especially given that prior to today its shares were trading at a premium of 23x annualised earnings.
This strikes me as being overly expensive for a company that was on course to post its third year of bottom line declines in a row.
Even after today's decline its shares are changing hands at a lofty 20x earnings. While this may be cheaper than industry peer Idp Education Ltd (ASX: IEL), I certainly believe there is better value for money on the market elsewhere.
In light of this, I would suggest investors continue to avoid Navitas until its shares are at a level befitting its current growth profile.
