Navitas : Half Year Financial Report

Navitas Limited

ABN 69 109 613 309

Half Year Financial Report

31 December 2018

Incorporating the requirements of Appendix 4D

Navitas Limited Half Year Financial Report

0

ASX APPENDIX 4D

Results for announcement to the market Report for the half year ended 31 December 2018
$m
Revenues from ordinary activities	477.4 Up 5%
Earnings before interest, tax, depreciation and amortisation (EBITDA)1	49.8 Down 25%
Earnings before interest and tax (EBIT)2	36.1 Down 31%
Profit after tax from ordinary activities attributable to members	21.4 Down 14%

Dividend information
Amount per share (cents)Franked amount per share (cents)
Interim 2019 dividend	nil nil

Following Navitas' entry into a Process and Confidentiality Deed with the BGH Consortium on 14 January 2019 in relation to the BGH Consortium's non-binding proposal to acquire 100% of the shares in Navitas by way of scheme of arrangement (Scheme) for $5.825 per share (Revised BGH Proposal), which the Navitas Board intends to recommend to shareholders subject to certain developments and conditions (described in Navitas' ASX announcement on 15 January 2019), an interim dividend has not been declared.

Under the current agreement between Navitas and the BGH Consortium, Navitas would be permitted to pay dividends prior to implementation of the Scheme, subject to certain conditions (and with the effect that the amount of any such dividends, excluding the value of any franking credits attached, will be deducted from the offer price payable by the BGH Consortium under the Revised Proposal). With a view to Navitas being able to deliver a fully franked dividend to its shareholders, the Navitas Board has determined to defer declaring any interim dividend (for the period ended 31 December 2018). However, the Navitas Board intends to declare and pay a dividend (of a quantum to be determined) prior to implementation of the Scheme, in order to distribute available franking credits. If the Scheme does not proceed, the Navitas Board would still expect to pay a dividend.

31 Dec 2018	31 Dec 2017
Net tangible asset backing per ordinary security	(108 cents) (79 cents)

Additional Appendix 4D disclosure requirements can be found in the directors' report and the 31 December 2018 half year financial statements and accompanying notes.

This report is based on the consolidated half year financial statements which have been reviewed by the Company's auditors.

This information, comprising the information required by Listing Rule 4.2A, should be read in conjunction with Navitas Limited's 2018 Annual Report available on Navitas' website,www.navitas.com.

All comparisons are with the reported results for the six months ended 31 December 2017.

Note

1 EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, impairments and non-operating gains or losses. EBITDA excludes the share of results of equity accounted investments in joint ventures.

2 EBIT excludes share of net profit/(loss) of entities accounted for using the equity method

ASX ANNOUNCEMENT

5 February 2019

REVENUE AND EBITDA GROWTH IN CONTINUING BUSINESS FOLLOWING RATIONALISATION OF

CAREERS AND INDUSTRY DIVISION

Navitas has reported growth in revenue and Pro forma1 EBITDA for continuing operations2 after excluding the non-recurring costs associated with the rationalisation of our Careers and Industry division and the bid advisory fees incurred in response to the BGH Consortium bid.

Key Highlights

Operational

• • Excellent student outcomes across all Divisions including University Partnerships pass rates (82%), retention rates (88%) and progression rates (93%);

• • Student enrolments up 5.4% in first two semesters in University Partnerships;

• • Contract renewals completed with Robert Gordon University in Scotland and Canterbury University in New Zealand;

• • Strong business development performance with 3 new college agreements signed with the University of Twente, The Hague University and James Cook University;

• • Appointment of experienced new CEO for University Partnerships North America; and

• • Strong growth in SAE following closure of underperforming businesses.

Financial

• • Statutory Group revenue increased 5% compared to HY18, with Pro forma1 EBITDA down 24%;

• • On a continuing operations2 basis, Pro forma1 EBITDA of $73.6m is in line with recent market guidance of between $148m and $153m in FY19

• • University Partnerships Revenue increased by 6% with a 21% EBITDA margin;

• • The SAE continuing operations2 improved EBITDA margin to 18% from 16% in HY18;

• • NPAT of $21.4m, including $13.8m of bid advisory fees and other expenses incurred in connection with the BGH proposals;

• • Operating cash flow of $37.5m impacted by costs of closing discontinued businesses; and

• • No interim dividend declared in respect of the six months ended 31 December 2018. The Board intends to declare and pay a dividend (of an amount to be determined) prior to implementation of the Scheme, in order to distribute available franking credits.

Navitas Group Chief Executive Officer, David Buckingham, said:

"Student outcomes remain the cornerstone of our business and I'm very pleased that we have continued to deliver strong academic and experience outcomes to our students and partners."

"Our University Partnerships operations performed strongly in the first half, particularly in our Canadian and United Kingdom operations as we continue to recruit strongly across the globe and expand our college pipeline. The performance of the Careers and Industry Division has benefited from the decision to rationalise our US SAE portfolio and close a number of unprofitable operations. We are on track to achieve our FY19 EBITDA guidance issued at our recent AGM."

"The business outlook is positive with global demand for education and training remaining strong and providing Navitas with growth opportunities in traditional and emerging fields."

"The BGH due diligence process continues to progress in accordance with the agreed timeline. We are working hard to mitigate risks of disruption to students, staff and partners as we work towards a binding agreement to confirm and implement the BGH proposal."

• 1 Pro forma EBITDA includes share of Joint Ventures EBITDA

• 2 Excludes the trading contribution and closure costs of US SAE closed colleges in LA and San Jose, the Health Skills Australia business and bid advisory fees and other expenses accrued in connection with the BGH proposals

Segment Summary

Divisional EBITDA results are as follows:

Reported
	$m
HY19		HY18	vs pcp (%)	HY19	HY18	vs pcp (%)
Revenue
UP	315.0	296.9	6%	315.0	296.9	6%
SAE	104.8	92.7	13%	107.3	98.4	9%
PEP	49.6	55.0	(10%)	51.5	58.8	(12%)
Corporate	2.8	2.0	37%	2.8	2.0	37%
Total Revenue	472.2	446.6	6%	476.5	456.1	5%
EBITDA
UP	67.2	66.2	2%	67.2	66.2	2%
SAE	18.4	14.5	27%	9.2	13.1	(30%)
PEP	6.3	7.2	(12%)	6.7	6.7	(1%)
Corporate - Operating Costs	(19.4)	(19.3)	0%	(19.4)	(19.3)	0%
Corporate - Bid Advisory Fees	-	-	-	(13.8)	-	-
Share of Joint Ventures	1.1	0.6	71%	1.1	0.6	71%
Pro forma1 EBITDA	73.6	69.1	6%	50.9	67.3	(24%)
University Partnerships Division

Continuing Operations2

The Division delivered high academic outcomes across its University Partnerships colleges with revenue increasing by 6%. Pro forma1 EBITDA increased by 2% with EBITDA margins of 22% impacted by investment in start up costs for new partners, a new direct channel and additional teaching costs to improve student outcomes in specific colleges. Enrolments were strong in the UK up 16% and in North America up 7% primarily due to demand in Canada. Australia and New Zealand grew enrolments by 2% with student numbers across the rest of the world down 4%.

A strong business development pipeline has resulted in the company's first European colleges with two agreements signed in the Netherlands at the University of Twente, and The Hague University. In addition a third contract was established in Australia with James Cook University. Three further contracts are expected in the second half subject to final commercial negotiations and an additional two possible before the end of the financial year.

Careers and Industry Division

The Division continued to focus on academic outcomes and student experience with students reporting high levels of satisfaction with program and teaching quality. The rationalisation of the division in FY18 resulted in the sale of the majority of Health Skills Australia to Holmesglen with the Brisbane business transferring to Queensland TAFE and the closure of both the LA and San Jose SAE colleges in the US. The sale process for the remainder of the SAE US colleges is ongoing.

SAE's US business improved its performance following reductions in its cost base and solid enrolments into the continuing colleges. However, the lower margin level of these businesses still depressed the overall margin of SAE for HY19.

Navitas Ventures

Navitas Ventures continued to monitor the education technology sector with two further investments made in the period including an increase in our existing investment with a developing online provider and a new investment in a business model for the delivery of remedial programs via an online platform.

Summary

The underlying growth in our University Partnerships colleges and an improved performance in our Careers and Industry division is a positive start following the decisions made in FY18 to rationalise the Careers and Industry portfolio. The renewal of two University Partnerships colleges and establishment of three new partnerships demonstrates the strength of the business development pipeline that supports medium to long term growth.

Navitas' operating businesses are performing in-line with our recent guidance and we anticipate a stronger second half following the larger Australian and New Zealand student enrolments in February 2019.

The Company continues to progress the due diligence process with BGH and to communicate with staff and partners to address any uncertainty about the proposals. The Board intends to recommend the offer to shareholders at the completion of this activity; subject to the BGH Consortium confirming its offer price of $5.825 per Navitas share, as well as the other conditions outlined in Navitas' ASX announcement dated 15 January 2019.

• 1 Pro forma EBITDA includes share of Joint Ventures EBITDA

• 2 Excludes the trading contribution and closure costs of US SAE closed colleges in LA and San Jose, the Health Skills Australia business and bid advisory fees and other expenses accrued in connection with the BGH proposals

------ENDS------

For further information contact:

Phil Mirams, Chief Financial Officer Navitas Limited

Tel: [phone] Mob: [phone]

About Navitas

Navitas is a leading global education provider that offers an extensive range of educational services through two major Divisions to students and professionals including university programs, creative media education, professional education, English language training and settlement services. Navitas is a S&P/ASX200 company. Further details about Navitas are available atwww.navitas.com