The share price of Australia's largest listed private education provider Navitas Limited (ASX:NVT) has taken a large hit today following the release of a disappointing half yearly earnings report for the period ending 31 December 2017.
At the time of writing, the company's share price is down 7% to $4.87 after bouncing off an intra day low of $4.72.
Key highlights from today's earnings report:
- Revenues from ordinary activities were down 4.6% to $456.7 million.
- EBITDA was down 12.9% to $66.7 million.
- Group EBITDA margin fell from 16% to 14.6%.
- Profit after tax from ordinary activities declined 53.6% to $24.7 million.
- Earnings per share fell by 52% to 6.9 cents.
- A fully franked interim dividend of 9.4 cents is to be paid on March 15.
What happened?
Group revenue declined by 5% on the prior corresponding period due to the first half of FY17 including income from now closed colleges, more AMEP contract regions and a contribution from Edith Cowan College (ECC) before its conversion to a joint venture.
The closed colleges at Macquarie University and Curtin Sydney, the pre ECC conversion, and increased AMEP contract regions contributed $16 million in EBITDA for the first half of FY17. Excluding these items, group revenue for the first half of FY18 grew by 5% and recurring EBITDA increased by 10% from $60.6 million to $66.7 million.
Furthermore, the decline in net proft after tax was also impacted by a $7.5 million reduction in the carrying value of U.S. tax loss assets following last month's passing of the U.S. Tax Cuts and Jobs Act and a one-off non-cash gain of $17.3 million on ECC's conversion to a joint venture that occurred in the prior corresponding period.
From an operational perspective, Navitas continues to improve student outcomes across all of its divisions with pass rates reaching 84%, retention rates at 90% and progression rates at 94%. The company also saw underlying growth in University Partnerships enrolments rise by 8% for the period.
Prior to today's earnings announcement, bullish sentiment surrounding Navitas had risen with the stock trading at a forward P/E of approximately 26, which in hindsight was a bit too high for a company whose earnings peaked in 2015.
