Shares of education services provider Navitas Limited (ASX: NVT) have been slammed today, despite a strong rise in revenue and net profit for the 2015 financial year (FY15).
For the 12 months ended 30 June 2015, Navitas reported revenue of $980.3 million a 12% increase compared to the $878.3 million reported in 2014, while reported net profit after tax (NPAT) was 39% higher than the previous year at $71.8 million, up from $51.6 million in FY14.
The result was largely driven by a 13% increase in revenues from the group's University Programs division where a slight improvement in margins also helped underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to grow by 15%.
Meanwhile, the group's Professional and English Programs Division recorded underlying EBITDA growth of 17% despite a slight decrease in revenues, while revenue grew by 23% in its SAE Division, leading to 7% EBITDA growth for the segment.
Although the results for the year were quite impressive, investors were more focused on the guidance provided by management for the 2015/16 financial year. Indeed, EBITDA is expected to remain broadly in line with the $163.1 million reported for FY15 with the material earnings impact from the loss of the University Programs MQC and SIBT on-campus contracts expected to take effect from February 2016.
As the shares plummeted as much as 11.2% to a low of $4.05, the company said: "The significant changes currently being experienced by the education sector globally, including the effect of regulation, technology and competition is unprecedented in Navitas' 20 year history."
However, management also believes that Navitas is well equipped to cope with these changes thanks to its diversified portfolio and strong heritage of delivering high quality education to students. Indeed, Navitas is a high-quality corporation with a market capitalisation just under $1.7 billion following today's declines. Although it is by no means a risk-free investment, it is certainly one worth considering for long-term investors especially if it continues to fall in price in the near future.
