W O R L D
C L A S S
Q U A L I T Y
A N N U A L R E P O R T 2 0 1 6
CONTENTS
Operating and Financial Review 4
Navitas’ Global Footprint –
Colleges, Campuses and Offices 4
Highlights and Achievements 6
Board of Directors 8
Navitas Leadership Team 10
Chairman’s Report 14
Group Chief Executive Officer’s Report 16
Review of Operations 20
Strategy and Corporate Responsibility 30
ValueShare Incentive Scheme 34
Corporate Governance Statement 35
Financial Statements 38
Consolidated Statement of Profit or Loss
and Other Comprehensive Income 38
Consolidated Statement of Financial Position 39
Consolidated Statement of Cash Flows 40
Consolidated Statement of
Changes in Equity 41
Notes to the Financial Statements 42
Directors’ Report 78
Directors’ Declaration 93
Independent Auditor's Report 94
Additional Information 96
Investor Information 97
Glossary 98
Corporate Information 102
World Class Quality
Navitas exists to provide people around the world with
the opportunity to realise their ambitions through lifelong
education and training.
We do this by anticipating the world’s learning needs,
creating and delivering a comprehensive range of quality
education options and equipping people with essential
skills and experiences.
Navitas Limited Annual Report 2016 1
VISION
To be one of the most
trusted learning organisations
in the world
MISSION
Navitas is passionate about
creating opportunities through
lifelong learning, and being a
global leader in delivering
better learning solutions
VALUES
We have conviction to our
purpose and potential
We demonstrate drive by
achieving and advancing together
We are adventurous in
mind and spirit
We demonstrate rigour in
enhancing our professional
reputation and credibility
We are genuine in the way we
behave and deliver
We show respect by celebrating,
valuing and caring for people
and the environment
E N C O U R A G I N G
Q U A L I T Y
G U I D I N G T H O S E A R O U N D U S T O A C H I E V E E L E V A T E D G O A L S
4
Navitas Limited Annual Report 2016
NAVITAS’ GLOBAL FOOTPRINT
– COLLEGES, CAMPUSES AND OFFICES
Navitas offers an extensive range of educational services via
more than 120 colleges and campuses across its global network.
More information about education opportunities at these
locations is available at navitas.com.
North America
Atlanta, Boca Raton, Boston, Chicago,
Dartmouth, Durham, Emeryville, Los
Angeles, Lowell, Miami, Nashville,
New York, San Francisco, San Jose,
Vancouver, Winnipeg
Mexico
Inicio
South America
Bogota
Colleges and Campuses (Region)
Offshore Marketing Offices (Region)
China, India, Japan, Middle East, Nigeria, Pakistan, Russia,
South Korea, Turkey, UK, Vietnam
Colleges and Campuses (City)
Offshore Marketing Offices (City)
Bangalore, Beijing, Beyoglu, Chengdu, Dubai, Guangzhou, Hanoi, Ho Chi Minh
City, Hong Kong, Jakarta, Kuala Lumpur, Lagos, Lahore, London, Moscow, New
Delhi, Pune, Riyadh, Seoul, Shanghai, Singapore, Taipei, Tokyo
Navitas Limited Annual Report 2016 5
United Kingdom
Aberdeen, Birmingham, Cambridge,
Edinburgh, Glasgow, Hertfordshire, Liverpool,
London, Northampton, Oxford, Plymouth,
Portsmouth, Swansea
Europe
Amsterdam, Athens, Belgrade, Barcelona, Berlin, Bochum,
Brussels, Bucharest, Cologne, Frankfurt, Geneva, Hamburg,
Istanbul, Leipzig, Ljubljana, Madrid, Milan, Munich, Paris,
Rotterdam, Stockholm, Stuttgart, Vienna, Zurich
Bangladesh
Dhaka
Middle East
Amman, Dubai
Sri Lanka
Colombo
South East Asia
Bangkok, Jakarta,
Singapore
Africa
Cape Town
Australia/New Zealand
Adelaide, Auckland, Brisbane,
Byron Bay, Canberra, Christchurch,
Geelong, Gold Coast, Darwin,
Melbourne, Newcastle, Perth, Sydney
6
Navitas Limited Annual Report 2016
HIGHLIGHTS AND
ACHIEVEMENTS
KEY HIGHLIGHTS
Continued focus on quality delivers
increases in progression-to-university and
pass rates for University Partnerships
and enhanced student experience and
academic outcomes across all Divisions;
Group revenue exceeds $1 billion
– grows 3% to $1,010.7m;
Group EBITDA of $164.6m, up 1%;
Reported Net Profit After Tax of
$90.1m, a 25% increase on FY15;
Fully franked final dividend of 9.9 cents per Share,
taking the full year dividend to 19.5 cents per Share;
All maturing University Partnerships agreements
renewed with no material changes;
Efficiency drives margin improvement in
Professional and English Programs;
SAE recognised in Australian government
survey for sector-leading student support
and engagement outcomes;
Senior executive capacity and depth
enhanced with new CFO and CIO; and
Executive leadership team expanded to
include heads of University Partnerships
from the three core regions.
1b
Over $1 billion
in revenue
25
Reported Net profit
after tax — $90.1m
26
Reported Earnings
per Share — 24.0 cents
80k
Over 80,000
students
$1m
Over $1 million
of scholarships
and donations
2.8k
Over 2,800 hours
volunteered
5 Year Financial Summary
2016
$000s
2015
$000s
2014
$000s
2013
$000s
2012
$000s
% Change
16/15
Revenues
1,010,651
980,341
878,219
731,734
688,530
Underlying EBITDA*
164,581
163,107
144,929
130,002
126,817
3%
1%
Profit attributable to
members of Navitas
90,078
71,810
51,584
74,575
73,149
25%
Basic earnings per Share (cents)
24.0
Interim dividend per Share (cents)
(fully franked)
Final dividend per Share (cents)
9.6
9.9
19.1
9.4
10.1
13.7
9.4
10.1
19.9
9.3
10.2
19.5
9.4
10.1
EVA created
60,286
62,861
51,779
46,602
38,524
26%
2%
-2%
-4%
Operating cashflows
125,810
141,834
140,939
126,819
73,859
-11%
Total equity
209,799
206,667
211,709
235,747
233,560
Return on capital employed
21.6%
22.8%
19.9%
19.0%
19.4%
* Excluding goodwill impairment
2%
-5%
43%
46%
40%
BOARD
DIVERSITY
MANAGEMENT
DIVERSITY
STAFF
DIVERSITY
Navitas Limited Annual Report 2016 7
805
Other
811
ABCN
1,200
Management
DONATIONS
($000)
1,000.0
90.0
Revenue Distribution
Australia
UK
Europe
Canada
USA
ROW
Wealth Distributed ($m)
Wealth Distributed (%)
Health and Safety*
FY12
FY13
FY14
FY15
FY16
7
5
24
$731.0m
10
21
33
498.1
529.5
664.0
717.6
731.0
University and
consortium partners
Teaching and
academic employees
Other employees
Shareholders — dividends
Governments — taxes
Reinvested as depreciation,
amortisation and
retained earnings
FY16 FY15
0
0
2.27
Metric
Fatalities
Lost Time Injury
Frequency Rate
(LTIFR)†
Prosecutions
or Regulatory/
Improvement
notices
*Australia only
† number of lost time injuries
per million hours worked
0
2.3
0
Revenue ($m)
Underlying EBITDA* ($m)
NPAT ($m)
FY12
FY13
FY14
FY15
FY16
688.5
731.7
878.2
980.3
FY12
FY13
FY14
FY15
1010.7
FY16
* Excluding goodwill impairment
126.8
130.0
144.9
163.1
164.6
FY12
FY13
FY14
FY15
FY16
73.1
74.6
71.8
51.6
90.1
HARVEY COLLINS
BBus, FCPA, SFFin, FAICD
Non-Executive Chairman
Appointed 9 November 2004
Mr Collins has extensive executive and board
experience in a range of industries.
From 1986 to 1996 he held senior
management roles in Western Australian
regional bank, Challenge Bank Limited,
including five years as Chief Financial Officer.
From 1997 to 2002, he was an executive
director of listed investment company,
Chieftain Securities Limited. From May 2009
to September 2012, he was the non-executive
Chairman of Bank of Western Australia
Limited (Bankwest). From February 2004
to 30 June 2013, he was a non-executive
director (Deputy Chairman) of Verve Energy
(Electricity Generation Corporation).
Mr Collins has held board appointments in
industries as diverse as financial services,
health insurance, telecommunications,
equipment hire, mining services, electricity
and the not for profit sector. He is a past
member of the WA State Council of the
Australian Institute of Company Directors.
During the past three years, Mr Collins
has not served as a director of any other
listed companies.
LISA PAUL
AO, PSM, BA (Hons), FAICD, FACEL, FAIM,
FIPAA, FANZSOG
Non-Executive Director
Appointed 2 February 2016
Ms Paul has been a Chief Executive in
the Australian federal government for 11
years, most recently as the Secretary of
the Australian Government Department of
Education and Training.
In 2011, Ms Paul was made an Officer of the
Order of Australia for distinguished service
to public sector leadership. In 2003, she was
awarded a Public Service Medal for leading
the Australian Government's domestic
response to the Bali bombings.
Ms Paul is a fellow of the Australian Institute
of Company Directors, a fellow of the
Australian Council for Educational Leaders,
National Fellow of the Institute of Public
Administration Australia, a fellow of the
Australian Institute of Management, an
Australian National University Public Policy
Fellow, a member of Chief Executive Women
and a Fellow of the Australian and New
Zealand School of Government.
Ms Paul currently serves on the boards of
Programmed Group and APM International.
She is also on the boards of Social Ventures
Australia, Australian Schools Plus, High
Resolves and the Australia American
Educational Leadership Foundation Ltd. She
is also a member of the Advisory Board to the
Melbourne Accelerator Program.
During the past three years Ms Paul has
served as a director of the following other
listed company:
• Programmed Maintenance Services
Limited* (from 3 February 2016
to present)
* Denotes current directorship
8
Navitas Limited Annual Report 2016
TONY CIPA
BBus, Grad Dip Accounting
Non-Executive Director
Appointed 1 May 2014
Mr Cipa has extensive international business
and finance experience including his roles
as CFO and Executive Finance Director for
CSL Limited, the ASX listed international
biopharmaceutical company.
During his time leading the finance function
of CSL the company grew from a previously
government owned business to a global
market leader with over 20 international
locations including the USA, UK, Canada
and Germany. Mr Cipa was CFO from 1994
to 2000 then served as Executive Finance
Director on CSL's Board of Directors from
2000 to 2010.
Mr Cipa is currently the Chairman of the Audit
and Risk Committee and a Non-Executive
Director of Healthscope Limited. He was
previously a Non-Executive Director at
Mansfield District Hospital and the Chairman
of the Audit and Risk Committee and a Non-
Executive Director of Skilled Group.
During the past three years Mr Cipa has
served as a director of the following other
listed companies:
• Skilled Group
(from 4 April 2011 to 19 October 2015)
• Healthscope Limited*
(from 28 June 2014 to present)
* Denotes current directorship
BOARD OF
DIRECTORS
TRACEY HORTON
BEcon (Hons) UWA, MBA Stan,
Prof Emer, FAICD, FGIA
Non-Executive Director
Appointed 13 June 2012
Ms Horton has extensive international
business and education experience most
recently as Winthrop Professor and Dean of
the University of Western Australia’s Business
School where she was responsible for leading
more than 200 faculty and staff and around
5,000 students.
Prior to this role she completed executive or
senior management roles in North America
with Bain & Company and across Australia
with Poynton and Partners and the Reserve
Bank of Australia.
Ms Horton has significant governance
experience including past directorships
with Skilled Group and Automotive Holdings
Group. Ms Horton is a Commissioner for
Tourism Western Australia, Chairman of
Presbyterian Ladies College and Immediate
Past President of the Chamber of Commerce
and Industry (WA). Ms Horton is also a
member of the Australian Takeovers Panel,
the national board of the Australian Institute
of Company Directors and the Bain &
Company Advisory Board. She was previously
Chairman of D’Orsogna Ltd, Deputy Chair of
the Water Corporation in WA and Chairman of
Fashion Council - WA.
During the past three years Ms Horton has
served as a director of the following other
listed companies:
•
Skilled Group (from 10 February 2011 to
19 October 2015)
• Automotive Holdings Group Limited
DIANA EILERT
BSc Maths & Chemistry,
MComm Finance & Marketing
Non-Executive Director
Appointed 28 July 2014
Ms Eilert is a professional non-executive
director with extensive board and executive
experience gained in a 25 year career across
a variety of sectors.
Ms Eilert is currently a non-executive director
of Super Retail Group (ASX: SUL), AMP
Life, Network NSW and Queensland Urban
Utilities, and was previously a Non-Executive
Director of digital business realestate.com.
au (ASX:REA), Veda Group Limited (ASX: VED)
and digital start-ups such as “onthehouse”
and OurDeal.
Ms Eilert has held operational roles as Group
Executive in Suncorp’s entire insurance
business and later, Group Executive People,
Technology, Marketing and Joint Ventures
for Suncorp. She had 10 years’ experience
with Citibank running retail bank credit and
risk, the mortgage business, the retail funds
management business, and the Direct Bank,
reporting to the Country Head.
Most recently Ms Eilert was Head of Strategy
and Corporate Development for News Ltd,
where her focus was on digital transformation
and emerging business models.
During the past three years Ms Eilert has
served as a director of the following other
listed companies:
• Super Retail Group*
(from 21 October 2015 to present)
• Veda Group Limited (from 18 October
2013 to 26 February 2016)
(from 3 May 2012 to 20 November 2015)
• Onthehouse Holdings Limited
(from 1 July 2012 to 26 November 2013)
* Denotes current directorship
Navitas Limited Annual Report 2016 9
ROD JONES
BComm, DEd (Hon) ECowan, MAICD
Group Chief Executive Officer
and Managing Director
Appointed 18 June 2004
For Mr Jones' full biography, see page 10.
JAMES KING
BComm, FAICD
Non-Executive Director
Appointed 9 November 2004
Mr King brings to the Board of Navitas
over thirty years of management and
board experience with major multinational
corporations in Australia and internationally.
Mr King was with Foster's Group Limited and
was Managing Director Carlton & United
Breweries and Managing Director Foster's
Asia. Prior to joining Foster's in 1997, Mr King
was President of Kraft Foods (Asia Pacific)
and resided in Hong Kong for six years from
1991.
Mr King is currently a non-executive director
of Lovisa Holdings Limited. He was previously
on the board of Pacific Brands Limited, The
Trust Company Limited, JB Hi-Fi Limited, the
Council of Xavier College Melbourne and
was also Chairman of the Juvenile Diabetes
Research Foundation (Vic).
Mr King is a Fellow of the Australian Institute
of Company Directors, and is the immediate
past Captain of Royal Melbourne Golf Club.
During the past three years, Mr King has
served as a director of the following other
listed companies:
•
•
Lovisa Holdings Limited*
(from 17 May 2016 to present)
JB Hi-Fi Limited
(from 10 May 2004 to 29 October 2015)
• Pacific Brands Limited
(from 4 September 2009 to 14 July 2016)
•
The Trust Company Limited (from 1
February 2007 to 18 December 2013)
* Denotes current directorship
Pictured left to right:
Tony Cipa, Lisa Paul, Harvey Collins, Tracey
Horton, Diana Eilert, Rod Jones, James King.
10
Navitas Limited Annual Report 2016
ROD JONES
BComm, DEd (Hon) ECowan, MAICD
Group Chief Executive Officer
and Managing Director
22 years with Navitas
Mr Jones has 45 years’ experience in
educational administration and has held a
number of senior administrative positions
within the Government and the private
education sectors. His background covers
both secondary and university education
in Australia. Mr Jones has been involved
in international education since 1987 and
is recognised as one of the leaders in the
successful establishment of the sector in
Australia. He is one of the co-founders of
Navitas and has been instrumental in the
expansion and development of the Navitas
model into the various markets in which it
now operates.
In April 2007, Mr Jones received an honorary
Doctor of Education from Edith Cowan
University in recognition of his outstanding
contribution to the development of the
international education sector both in
Australia and overseas, and in 2008 was
named the Australian Ernst and Young
Entrepreneur of the Year. In 2010, Mr Jones
was recognised by his colleagues with an
International Education Excellence Award
from the International Education Association
of Australia for his leadership in the field of
international education.
Mr Jones is a member of the Business
Council of Australia and the Australian
Institute of Company Directors. Mr Jones is
also a supporter of a number of charitable
causes in Australia.
During the past three years, Mr Jones
has not served as a director of any other
listed companies.
DAVID BUCKINGHAM
Engineering BTech (Hons), CA UK,
UK ACT, GAICD
Chief Financial Officer
6 months with Navitas
David took up the role of Chief Financial
Officer in January 2016 and is responsible
for the financial operations of the
Company globally.
He has a diverse educational background
and impressive career which he
began in the United Kingdom with
PricewaterhouseCoopers.
He later moved into the telecommunications
industry to which he devoted much of his
career. He has worked for Telewest Global,
Virginmedia, and iinet – where in the latter
he took the role of both Chief Financial
Officer and Chief Executive Officer.
PATRICK BROTHERS
BSc, MBA
Chief Development Officer
2 years with Navitas
Patrick joined Navitas in 2014 and as Chief
Development Officer, his focus is ensuring
Navitas is a global leader in the future of
education and work. He is responsible for
strategy, learning & teaching, new ventures,
business development and our global
marketing offices.
Patrick co-founded EduGrowth, Australia’s
national accelerator for education focused
startups and he is a member of the
World Economic Forum and B20 Human
Capital Taskforces.
Prior to joining Navitas Patrick held a number
of senior appointments working across
Asia, Europe and the Middle East. Patrick
was previously the Chief Development
Officer with the Leighton Group responsible
for major international public-private
partnerships, led acquisitions and joint
ventures across the tech, media, telco and
venture capital sectors with Deloitte and
served as an Officer in the Australian Army.
Patrick holds a Masters of Business
Administration from the Australian Graduate
School of Management, a Bachelor’s Degree
in Mathematics and Computer Science
from the University of New South Wales
and is a graduate of the Royal Military
College Duntroon.
NAVITAS LEADERSHIP TEAM
Navitas Limited Annual Report 2016 11
SCOTT JONES
BComm, GAICD
Chief Executive Officer of SAE
15 years with Navitas
Scott was appointed to the role of Chief
Executive Officer of SAE in 2014, having
been Chief Operating Officer at SAE
since 2013.
Prior to his role at SAE, Scott was Executive
General Manager responsible for Navitas’
Student Recruitment Division (from 2008 to
2012), Director of Marketing and Admissions
at Curtin University, Sydney (2005 to 2008),
and Marketing Manager (from 2001).
Scott has a strong track record of growth,
organisational performance and leadership,
both within Navitas and SAE, and before that
within the FMCG sector.
Scott started his career with Coca Cola
Amatil and the Mars Corporation in sales
and marketing roles.
MICK CAMPBELL
BSc, BSc Statistics (Diploma)
Chief Information Officer
2 months with Navitas
Mick joined Navitas in May 2016, bringing
over 20 years’ experience in IT with him.
He is responsible for leading the group
IT function at Navitas across all of the
Company’s global divisions.
He has held senior roles in a variety of
industries, spanning not-for-profits,
healthcare, professional services, IT, banking
and finance, and education. His career has
seen him work at the likes of AIT, Westpac,
Oracle, Ashurst, and Ramsay Health Care.
Most recently, Mick worked as the CIO
of Business Transformation at Cerebral
Palsy Alliance, where he was responsible
for formulating and executing IT strategy,
digitising the organisation and overseeing
IT projects. He held the position of CIO at
Ramsay health care for 8 years – a global,
ASX-listed hospital group operating over
150 hospitals across Australia, France, UK,
Indonesia and Malaysia.
Mick is an avid supporter of the Cerebral
Palsy Alliance, and in 2011 and 2014 was
a significant fundraiser and strategist for
raising over $175,000 for cerebral palsy
initiatives.
BEV HUDSON
BEd, Grad Dip Lang Studies, MEd
President and Chief Executive Officer of
University Partnerships, North America
10 years with Navitas
Bev has been working in international
education for thirty years over four
countries. The last ten years have been
working for Navitas in North America
across a number of roles including: College
Director and Principal at Navitas’ first
pathway program in North America; Fraser
International College; General Manager
for Navitas Canada and now as President
and Head of University Partnerships, North
America. Her current responsibilities are to
establish new partnerships and oversee the
operation of the Division in North America.
Bev has been involved in all aspects of
international education including curriculum
design, student services, faculty and in
administration of the International Division
at several universities where she developed
and implemented the strategic vision for
internationalisation at several universities
including internationalising the curriculum,
international recruitment and marketing,
student support, and international
partnership development.
Bev received her Master of Education
from Edith Cowan University. In 2014
she was awarded the International
Education Distinguished Leadership Award
from the British Columbia Council for
International Education.
12
Navitas Limited Annual Report 2016
ROB LOUREY
BBus (HR), ADip PM, MAICD
Head of Human Resources
3 years with Navitas
Rob has many years’ experience in the
human resources function across a
number of industries including media,
property, construction, manufacturing and
financial services.
Rob has been the principal human
resources executive in publicly listed
companies in each of these sectors and
has had responsibility for operations in
Australia, Asia, UK/Europe, Africa, US and
New Zealand.
Rob has been a non-executive director
with Afrox and Afrox Healthcare, South
African listed companies and Michael Page
International, a FTSE plc; and KU Children’s
Services, an Australian early childhood
education organisation.
Rob holds a Bachelor of Business in
Human Resources and an Associate
Diploma in Personnel Management and
is a member of the Australian Institute of
Company Directors.
PAUL LOVEGROVE
LLB(Hons) , MBA, MPhil
Chief Executive Officer of
University Partnerships, Europe
1 year with Navitas
Paul joined Navitas in 2015 and has
overall responsibility for establishing new
partnerships and overseeing all University
Partnerships operations in Europe. Paul is
responsible for determining the strategic
direction of the Division, overseeing the
quality of delivery and ensuring a focus
on efficiency.
A key area of activity for Paul has been
the focus on the determination of Navitas’
operating model with the development of a
community of excellence in conversion and
admissions. This has enabled the Division
to share best practice across the network
and to develop standard approaches. Paul
has also been working on building new
programme ranges for existing Colleges
with a high degree of focus on European and
domestic UK students.
Paul has a deep and intimate knowledge of
international higher education and pathways
markets in the United Kingdom gained during
his two decades of employment with Study
Group in a diverse range of roles. Across his
career, Paul worked his way from a teacher
to director of the pathway division, and
established trusted and strategic university
partnerships with over 18 higher education
institutions – 12 of which he personally led
the set-up of.
Paul holds a LLB from John Moores
University, an MBA in General Management
from the University of Brighton and a MA,
Research from the University of Brighton.
JOHN WOOD
BEcon (Hons), DPhil
Chief Executive Officer of
University Partnerships, Australasia
9 years with Navitas
John has overall responsibility to lead and
grow the operations of Navitas’ Australasian
University Partnerships colleges and also
oversees the relationships with Navitas’
partner universities.
He was the Deputy Vice-Chancellor at
Edith Cowan University and previously the
Foundation Dean of the College of Business
at the University of Notre Dame, Perth,
Western Australia, where he was also the
Deputy Vice-Chancellor (Academic).
John graduated with first class honours in
Economics from the University of Western
Australia and from Oxford with a Doctorate
in Economics and he has undertaken
Harvard’s strategic management program.
He has taught at universities throughout the
world, including at Oxford, the American
International University of Europe and
Stanford. He has edited and co-edited 153
volumes on the world’s great economists
and leading management thinkers.
John has held executive leadership
positions including in the Office of the
Prime Minister and in State Government in
the Departments of Premier and Cabinet;
Transport, Employment and Training; State
Development and Commerce and Trade.
He has served Ministers from all major
political parties. He also held senior private
sector positions, including a period as Chief
Economist and Strategist with Ernst & Young.
John also served on a range of boards,
including Perth Education City, the WA Chair
of the Committee of Economic Development
of Australia and was on the Board of HBF for
11 years. John was appointed by the State
and Federal Ministers to the Australian
Qualifications Framework Council during
2011 to 2014.
NAVITAS LEADERSHIP TEAM
(CONTINUED)
Navitas Limited Annual Report 2016 13
14
Navitas Limited Annual Report 2016
CHAIRMAN’S REPORT
Navitas’ vision is to be one of the most
trusted learning organisations in the world
and its core purpose is to deliver quality
student outcomes and student experience
through strategic partnerships. I believe
Navitas can achieve these goals via an
ongoing commitment to world class quality,
sustainable growth and global efficiency.
World Class Quality
Navitas was founded on its commitment
to student outcomes and continues to
demonstrate this across all its operations
globally. This was evidenced in the 2016
financial year by a number of highlights
including improvements in already
high University Partnerships pass and
progression-to-university rates, as well as
favourable regulatory reviews in key regions.
Extensive surveys of students and graduates
also showed continued high satisfaction with
the quality of teaching and programs.
Closely aligned with our focus on students is
a commitment to partners around the world -
be they universities, government or industry.
The Company continued to work closely
with its partners over the year to deepen its
relationships and to better understand and
deliver on key priorities.
Finally we have a commitment to our staff
and our wider community. Providing high
quality education and training to tens of
thousands of students and clients per year
adds immeasurable value to our societies. I
am also proud of the progress Navitas made
in the year to improve the health and well-
being of our staff and the communities we
interact with. You can read more on page 32.
Managing risk and supporting the senior
executive team through a challenging
transitory period has also been a key focus.
The Company continues to reposition itself
for the future and is constantly evolving,
externally and internally.
Sustainable Growth
Although a challenging year, Navitas achieved
a 3% increase in revenue and a 1% increase in
EBITDA for the period taking Group revenue
above $1 billion for the first time. This
demonstrates solid underlying growth across
the Company’s core business and highlights
the potential of ongoing new business
development opportunities.
Navitas continues to develop these organic
growth opportunities while refining its long
term growth strategy. This will include a
greater focus on industry partnerships
and pathways to employment as well as
new business models in the education and
training sector. Navitas is also addressing
technological change in the education sector
by partnering with EduTech accelerators such
as EduGrowth.
Global Efficiency
Another priority for the Board has been
improving global efficiency to ensure that
resources are prioritised on delivering quality
student outcomes and meeting partner
objectives. This included introducing new
processes and systems to improve efficiency
and ensuring best practice in student focused
areas such as recruitment, admissions
and Learning and Teaching as well as via
corporate support functions such as Finance,
IT and HR. Efficiency gains were made during
the year as part of a program that will extend
into 2017 and beyond.
This work is creating the right platform to
position Navitas for future growth, both
within and outside traditional markets.
Governance
A key focus of the Board is governance.
Our full corporate governance statement
is available online, and I would encourage
shareholders to read it in full, but a few points
are worth highlighting.
Succession planning is critical to the ongoing
success of Navitas and the Board has
focused on Director and Senior Executive
capability and renewal in the year. At a Board
level this has included welcoming Lisa Paul
as a new Non-Executive Director and the
announcement of my imminent retirement
from the role of Chairman following the
Annual General Meeting. I am pleased that
the Board has appointed Tracey Horton to
succeed me as Chairman. I will continue
to offer my services as a Non-Executive
Director for the remainder of my term.
At an executive leadership level we appointed
a new CFO and CIO during the year and
made changes in a number of other senior
roles across the Group. Ongoing succession
planning for key roles, including the Group
CEO, remains a priority for the Board.
Dividend and Share Buyback
The Company has delivered a fully franked
full year dividend of 19.5 cents per Share
in the 2016 financial year. The Dividend
Reinvestment Plan will continue and we are
still managing an active Share buy-back
program. To date approximately 19% of the
buy-back has been fulfilled and the Company
will continue to purchase Shares, when
appropriate, with a focus on value accretion.
The objective of the buy-back is to ensure
the Company maintains a suitable capital
position while maintaining its flexibility.
In closing I would like to thank the Board and
all Navitas employees for their contribution
to a sound performance for the year and their
willingness to embrace the changes needed
for a successful future.
HARVEY COLLINS
Chairman
Navitas Limited Annual Report 2016 15
"NAVITAS’ VISION IS TO BE
ONE OF THE MOST TRUSTED
LEARNING ORGANISATIONS
IN THE WORLD AND ITS
CORE PURPOSE IS TO
DELIVER QUALITY STUDENT
OUTCOMES AND STUDENT
EXPERIENCE THROUGH
STRATEGIC PARTNERSHIPS."
16
Navitas Limited Annual Report 2016
GROUP CHIEF EXECUTIVE
OFFICER’S REPORT
Throughout the 2016 financial year
Navitas continued to pursue its vision and
purpose with a focus on world class quality,
sustainable growth and global efficiency.
World Class Quality
High quality student outcomes continued
to be delivered across all Divisions and
regions. This included pass rates of over
80%, retention rates of over 85% and
progression to university rates of over
90% across the University Partnerships
Division. SAE achieved some strong
results in an independent survey run for
the Australian Department of Education
including outperforming some of Australia’s
top universities on learner engagement and
student support and Professional and English
Programs ELICOS colleges were voted the
best in Australia by students.
We also strengthened the world class quality
of our learning and teaching capability
by developing a global Learning and
Teaching function to support our teachers
and academic staff across all Divisions
and regions. This global function not only
improves the sharing of global innovations
in learning and teaching but also facilitates
the development of internal capability and
best practice.
Navitas continued to enhance its strategic
partnerships with universities, governments
and industry and in the year opened two new
pathway colleges and renewed all maturing
university agreements. The Company
progressed an initiative to better manage our
relationships with universities to meet their
strategic objectives.
We also relaunched our wellness, health and
safety program across the Group and saw
improvements in diversity across all levels. I
am particularly proud of the Navitas Education
Trust which, for the fourth year, supported
not-for-profits to improve access to, and the
quality of, education in areas of need.
Navitas’ executive leadership team capacity
and depth was enhanced by a number of
new executives in key roles, such as the
CFO and CIO, as well as the inclusion of
representatives from the core University
Partnerships regions of North America and
Europe for the first time. This refreshed
and expanded team is now well positioned
to support Navitas’ ongoing transition as
the Company continues to adapt to its
evolving landscape.
Sustainable Growth
Navitas has delivered on expectations,
meeting our FY16 earnings guidance by
recording EBITDA of $164.6m, despite the
completion of the Macquarie contracts and
the closure of Curtin Sydney. This result
highlights the strong underlying growth of
the business. It’s also worth highlighting that
Navitas’ revenues exceeded $1.0b for the
first time, a notable achievement.
This growth resulted in continued wealth
creation for key stakeholders including
partner universities, staff, Shareholders
and governments.
This wealth creation continued despite a
mixed operating environment globally. While
international education policy settings in
Australia, Canada and the US remained
supportive, the UK student visa regime
continued to be restrictive and is not likely
to improve in the near future. In addition,
changes to vocational education funding
systems in Australia have limited vocational
growth opportunities for high quality
providers like Navitas and are unlikely to be
improved until 2017.
However, global demand for international
education continued to grow in 2016 as
rising wealth, improving secondary education
systems and lack of tertiary infrastructure
encouraged more than 4.5m students to
study overseas.
Global Efficiency
Navitas has a focus on capital and
operational efficiency. In FY16 this was
demonstrated by:
• The creation of shared services centres
across a number of support areas.
• The closure of one University Partnerships
college and proposed closure of four sub-
scale SAE campuses.
Strategy
Navitas’ vision is to be one of the most
trusted learning organisations in the world
and its core purpose is to deliver quality
student outcome and student experience
through strategic partnerships.
FY16 was a period of consolidation for
Navitas with significant internal restructuring
to better position the Company for long
term growth. This included a strong focus on
improving efficiency across all Divisions and
functions with key achievements being:
• The reorganisation of the University
Partnerships Division to operate under
three core regions – Australasia, North
America and Europe;
• The creation of a global Learning and
Teaching function to drive academic
innovation and best practice across the
Company; and
• The creation of shared service centres for
core support services such as Finance, IT,
Property and HR.
$m
FY16
Change %
Distribution %
Operating revenue
Cost of services and other external costs
Total wealth created
Payments to university and consortium partners
Payments to teaching and academic employees
Payments to other employees
Payments to shareholders – dividends
Payments to governments – income taxes
Reinvested as depreciation, amortisation and retained earnings
Total wealth distributed
1,010.7
(279.7)
731.0
175.3
241.3
154.8
74.1
37.3
48.2
731.0
3
6
2
0
2
5
1
(6)
4
2
24
33
21
10
5
7
100
Navitas Limited Annual Report 2016 17
"AFTER MANY
YEARS OF STRONG
GROWTH, THE 2016
FINANCIAL YEAR
PROVIDED AN IDEAL
OPPORTUNITY
TO FOCUS ON
STANDARDISING
TO BEST PRACTICE
AND INTERNAL
EFFICIENCY ACROSS
A RANGE OF AREAS."
This work will continue into FY17. As well
as driving efficiency in FY17 and beyond, it
creates a solid platform for future growth
for the Company. This platform will allow
Navitas to continue to pursue organic
growth opportunities as well as invest in new
ventures and ways to grow the business.
Outlook
Navitas expects FY17 EBITDA will remain
broadly in line with the FY16 result.
This takes into account solid underlying
organic revenue growth in core markets
and the final financial impact of closing the
Macquarie and Curtin Sydney colleges in
Australia in H1 FY17.
However the future of global education
remains highly promising with sustained
demand for high quality education and
training. This is reflected in the underlying
growth demonstrated this year and expected
in the coming year across the Group.
In closing I would like to thank all Navitas
staff for their support to deliver solid
underlying growth in the 2016 financial year
and for their hard work to effect change as
we develop a platform for another 20 years of
Navitas growth.
ROD JONES
Group Chief Executive Officer
C O M M I T M E N T
T O Q U A L I T Y
O U R P L E D G E T O A S T A N D A R D O F E X C E L L E N C E
C O M M I T M E N T
T O Q U A L I T Y
O U R P L E D G E T O A S T A N D A R D O F E X C E L L E N C E
20
Navitas Limited Annual Report 2016
REVIEW OF OPERATIONS:
NAVITAS FINANCIAL PERFORMANCE
Navitas’ (the “Group” or “NVT”) results for the year ended 30 June 2016 and the prior corresponding period (pcp) are shown below.
Total revenue ($m)
Underlying EBITDA ($m)*
Reported NPAT ($m)
Reported EPS (cents)
Full year dividend (cents)
Dividend yield (%)
Year ended 30
June 2016
Year ended 30
June 2015*
% growth vs pcp
(actual FX)
% growth vs pcp
(constant FX)
1,010.7
164.6
90.1
24.0
19.5
3.6
980.3
163.1
71.8
19.1
19.5
4.5
3
1
25
26
-
(0.9)
1
1
Revenue ($m)
Underlying EBITDA* ($m)
NPAT ($m)
FY12
FY13
FY14
FY15
FY16
688.5
731.7
878.2
980.3
1010.7
FY12
FY13
FY14
FY15
FY16
126.8
130.0
144.9
163.1
164.6
FY12
FY13
FY14
FY15
FY16
73.1
74.6
51.6
71.8
90.1
UP
PEP
SAE
Corporate
Other
*excluding FY15 goodwill impairment
Revenue Distribution
Total revenue increased by 3%
to $1,010.7m (FY15: $980.3m)
with underlying growth being
offset by the transition to closure
of three University Partnership
colleges. Revenue was distributed
geographically as:
Australia
UK
Europe
Canada
USA
ROW
Navitas Limited Annual Report 2016 21
In line with guidance provided to the market,
Group underlying EBITDA increased by 1% to
$164.6m (FY15: $163.1m).
The Group and University Partnerships
EBITDA margins decreased to 16.3% (FY15:
16.6%) and 24.0% (FY15: 24.7%) respectively,
largely due to the effect of margin decline
in SIBT - formerly one of Navitas’ largest
partnerships. The Professional and English
Programs Division grew margins by 2.1% to
15.3% (FY15: 13.2%) as a result of a focus on
efficiency and SAE held their EBITDA margin
flat at 14.1% (FY15: 14.1%).
Divisional underlying EBITDA results are as follows:
$m
Year ended 30
June 2016
Year ended 30
June 2015*
% growth vs
pcp (actual FX)
% growth vs
pcp (constant
FX)
30 June 2016
EBITDA margin
(%)
University Partnerships
Professional and English Programs
SAE
Divisional EBITDA
Corporate costs
Group EBITDA
*excluding goodwill impairment
137.2
35.1
28.5
200.8
(36.2)
164.6
140.4
29.5
26.1
196.0
(32.9)
163.1
(2)
19
9
2
10
1
(2)
-
8
1
24.0
15.3
14.1
16.3
Navitas’ Business Model
Navitas operates three Divisions which are
primarily involved in the provision of high
quality education services. While each
Division is unique, the following items are
evident in each:
• Students are recruited appropriately to
a wide range of courses and programs
around the world;
• Commissions are often paid to
independent student recruitment agents
who provide counselling to students
and progress them through the student
visa process;
•
In the majority of cases tuition fees are
received in advance which drives Navitas’
negative working capital model;
• Students requiring face-to-face
teaching are accommodated in facilities
which, in the majority of cases, are
either leased from third parties or
provided by institutions under various
partnership agreements;
• Curricula are either developed
and submitted for accreditation by
Navitas or secured under partnership
agreements; and
• Most costs in the business including
teaching costs are variable. There is an
element of fixed costs required to set up,
run and administer Navitas colleges.
Operating Environment
While international education policies in
Australia, Canada and the US remained
supportive, the UK student visa regime
continued to be restrictive and is not likely
to improve in the near future. In addition, the
recent EU referendum could cause some
medium term uncertainty.
The Australian policy regime saw the most
positive changes with the launch of a 10
year National Strategy for International
Education and the introduction of the new
Simplified Streamlined Visa Framework
(SSVF) on 1 July 2016. As well as widening
access to streamlined visa processing the
SSVF has reduced the number of student visa
categories from eight to two and no longer
restricts the length of time students can
undertake English language study.
While higher education policy in Australia
remained supportive, widespread reforms
to Commonwealth vocational education
funding has limited growth opportunities for
quality vocational providers which is unlikely
to be improved until 2017. These vocational
reforms will continue to impact enrolments
in some SAE and Professional and English
Programs colleges in the medium term.
22
Navitas Limited Annual Report 2016
REVIEW OF OPERATIONS:
GROUP FINANCIAL SUMMARY
Financial controls and systems
Navitas continued to improve its financial
systems in FY16 with the roll-out of Oracle’s
E-Business Suite now largely complete. All
of Navitas’ operations in major jurisdictions
are now utilising Oracle which is also
fully integrated with the Navigate student
management system currently being
rolled out.
Capex and Depreciation
Capex for the period was $43.7m, a 15%
increase on FY15. This increase is largely
due to $24.4m of costs associated with
refurbishing the Group’s new education
campus on Elizabeth Street in Sydney. These
costs will be largely refunded through lease
incentives from the landlord in FY17 as the
refurbishment completes.
Depreciation for the year was $30.8m, a 13%
increase on FY15. This reflected increased
capital expenditure in recent years on new
campus fitouts at the Los Angeles, Perth
and Berlin SAE campuses and the continued
roll out of the new Navigate Student
Management System.
Interest
Net interest expense of $4.0m was in line
with the FY15 charge.
Tax
For the year ended 30 June 2016, Navitas’
global effective tax rate was 29.1%.
Navitas’ global tax rate is impacted by a
number of considerations, including the
entitlement to tax concessions (such as
Research and Development), as well as the
tax rates of the jurisdictions where Navitas
derives income. These factors substantially
account for any difference between Navitas’
global effective tax rate and the Australian
corporate income tax rate of 30%.
Navitas is committed to managing all
taxes in a sustainable manner with regard
to the regulatory, commercial and social
imperatives of our business and our
stakeholders. In conducting Navitas’
operations (both in Australia and offshore),
Navitas pays tax where the underlying
economic activity takes place.
Balance Sheet
Net debt at 30 June 2016 is $56.2m (30 June
2015: $36.0m). Key factors for the $20.2m
increase include:
• $26.8m for the share buyback initiated
in February 2016. To date 5.4m Shares
have been purchased and cancelled by
Navitas. The buy-back aims to ensure
Navitas maintains an appropriate capital
position while retaining flexibility for
growth opportunities. The buy-back has
been implemented to maximise value
accretion; and
• A reduction in cash flows from operations
as detailed below.
Shareholders’ funds at 30 June 2016 were
$209.8m (30 June 2015: $206.7m). Deferred
revenue at 30 June 2016 was $272.7m (30
June 2015: $280.6m). Deferred revenue has
decreased on the prior year principally due
to the impact of the closure of the Macquarie
colleges in February 2016.
Cash Flows
Operating cash flows of $125.8m for the
year ended 30 June 2016 were down by 11%
on the prior year (FY15: $141.8m) principally
due to increased payments for teaching
and marketing only partially offset by higher
customer receipts.
Shareholder Value and EVA®
Navitas utilises the economic value added
(EVA®) framework to assess Shareholder
value with EVA® being a measure of returns
relative to the Group’s weighted average
cost of capital for funds employed by the
business. Targets for EVA® growth are set
every three years and were most recently set
in April 2014.
EVA® for FY16 was $60.3m which represents
$2.6m decrease in EVA® compared to FY15.
Further details about the calculation of EVA®
can be found on page 34 of this report.
Rewards declared under Navitas’ staff
incentive scheme are based on the actual
financial performance of Navitas in any
one year. In FY16 rewards to staff have
been affected by the financial impact of
closing colleges.
This is consistent with the objective of
the scheme, which is to base rewards on
the sustained growth in EVA® actually
achieved, rather than on estimates of
future performance.
Dividend
The Directors have declared a fully franked
final dividend of 9.9 cents per Share (FY15:
10.1 cents). This takes the full year dividend
to 19.5 cents (FY15: 19.5 cents) in line with
the Company’s dividend policy.
The dividend will be paid on 15 September
2016 with the record date being 1 September
2016. The Navitas Dividend Reinvestment
Plan (DRP) will again be offered at no
discount to market. The last date for receipt
of an election notice to participate in the DRP
is by 5.00pm (AEDT) on 2 September 2016.
Navitas Limited Annual Report 2016 23
24
Navitas Limited Annual Report 2016
REVIEW OF OPERATIONS:
UNIVERSITY PARTNERSHIPS DIVISION
University Partnerships
Key Highlights
Financial Highlights
• Excellent pass rates of >80% and
progression to partner university
rates of >90%
• All maturing University Partnerships
agreements renewed with no
material changes
• Excellent student and graduate
survey results indicating high levels
of satisfaction with teaching and
academic quality
• Opening of two new colleges
– Western Sydney University
International College and University
of Northampton International College
• Discussions with potential new
University partners continue
• The Division now operates under
three key regions – Australasia, North
America and Europe, with the heads
of these regions part of Navitas’
executive leadership team
FY14
FY15
FY16
121.8*
499.2
140.4*
137.2
566.3
571.1
EBITDA ($m)
Revenue ($m)
*excluding goodwill impairment
UP Colleges
33 Worldwide
UP % of Divisional Revenue
$1,003.8m
UP % of Divisional EBITDA
$200.8m
7
10
16
Australasia
Europe
North America
57%
68%
Navitas Limited Annual Report 2016 25
Overview of Operations
• Retention rates of over 85%; and
The University Partnerships Division is a
global leader in providing specialised and
supportive pre-university and university
pathway programs, enhancing students’
probability of success in higher education.
The pathway program model focuses on
providing pre and first-year university
courses to international students from more
than 140 countries who do not qualify for
direct entry to partner universities due to
either language or academic record. Some
Australian and UK colleges also admit
domestic students who do not gain direct
entry to our partner universities.
University Partnerships courses are
delivered via on-campus colleges, through
an agreement with a partner university, in a
structured environment aimed at maximising
student success. This includes additional
teaching hours, smaller class sizes and
increased levels of learning support and
pastoral care.
Upon completion students then qualify to
enter the second year program at the partner
university, with the final objective to receive
a qualification from the university.
In FY16 the Division offered Certificate,
Diploma, Associate Degree, Bachelor and
Masters programs to more than 20,000
students in 33 colleges and managed
campuses across Australia, New Zealand,
Singapore, the UK, US, Canada and
Sri Lanka.
Quality
The Division remains focused on academic
quality and student outcomes working with
partner universities to enhance academic
and support services to students. The
Division’s 2015 annual review of academic
quality and outcomes has continued to
highlight pleasing results with:
• Pre university and pathway program
pass rates of over 80%;
• A progression to partner university rate
of over 90%.
More than 5,500 students and recent
graduates participated in student
satisfaction surveys in 2015. The results
demonstrate a very high level of satisfaction
with Navitas programs. Beyond the survey
results, the success of these programs is
further evidenced by the academic outcomes
achieved, with Navitas students performing
as well as international students who had
gained direct entry to university.
Highlights include:
• Over 97% of surveyed students
were satisfied with their teaching
experience; and
• 98% of graduates surveyed were
satisfied with the overall quality of their
program of study at a Navitas University
Partnership College.
Growth
The Division’s FY16 enrolment growth was
impacted by the closure of Macquarie and
Curtin Sydney colleges. Equivalent full time
student units (EFTSU) grew by 0%, 2% and
0% globally for each semester respectively in
the year compared to pcp. Excluding these
transitioning colleges EFTSU grew 2%, 4%
and 11% globally for each semester. Average
fee growth was ~5% across the Division.
The Division recorded a 1% increase in
revenue to $571.1m (FY15: $566.3m) with
EBITDA decreasing by 2% to $137.2m (FY15:
$140.4m). There was strong earnings growth
in North America, especially Canadian
colleges and a solid contribution from UK
colleges despite weak volume growth.
Excluding closing colleges the Australasian
region delivered solid underlying growth too.
Two new colleges were opened in the year
– Western Sydney University International
College and University of Northampton
International College. The Division
also renewed all maturing university
agreements, under materially similar
terms and conditions, and extended the
PIBT agreement to allow enough time for
negotiations on a longer term renewal in a
new joint venture structure to conclude.
In addition the Division worked with
university partners to develop a range of new
courses and programs across all regions.
Efficiency
A number of initiatives were progressed
in FY16 to improve efficiency across the
Division. This included the closure of an
under-performing college in the US, to the
development of a central admissions and
conversion centre to manage all UK college
enrolment processes.
To recognise the Division’s global scale
the University Partnerships Division
now operates under three key regions;
Australasia, North America and Europe.
Navitas’ executive leadership team has also
been expanded to include the leaders of
the three key regions. Succession planning
and personal development plans were also
reviewed across key management positions
in FY16.
Outlook
Underlying volume and fee growth in the
Division’s operations across all regions is
expected to continue following ongoing
demand globally for high quality education in
key destination countries.
However, the Division’s revenue and
EBITDA will continue to be impacted by the
completion of the Macquarie contract and
the closure of Curtin Sydney.
26
Navitas Limited Annual Report 2016
REVIEW OF OPERATIONS:
PROFESSIONAL AND ENGLISH PROGRAMS
Key Highlights
• Teaching quality at ACAP and
•
NCPS rated highly by students in a
national survey;
• Several Australian ELICOS
colleges voted by students as
the best in Australia;
• Sixth consecutive year
of strong growth;
Improved operational efficiency
and cost controls across the
Division delivers 2.1% margin
improvement; and
• Solid growth from Careers &
Internships, Australian College
of Applied Psychology and Navitas
College of Public Safety.
Financial Highlights
FY14
FY15
FY16
25.3
29.5*
224.2
224.0
35.1
229.9
EBITDA ($m)
Revenue ($m)
*excluding FY15 goodwill impairment
PEP % of Divisional Revenue
$1,003.8m
PEP % of Divisional EBITDA
$200.8m
23%
18%
68%
Navitas Limited Annual Report 2016 27
Overview of Operations
Quality
The Professional and English Programs
Division (PEP) comprises four business units:
• English and Foundation Skills: provides
settlement services and English language
and literacy programs principally to
migrants and refugees settling in
Australia. The programs, including
AMEP, SEE and HSS, are funded by the
Commonwealth government.
• Careers and Learning Skills: prepares
students for further learning and enables
students and clients to gain work
experience, and ultimately employment,
through English language courses, work
skills and career services. Careers and
Learning Skills includes ELICOS, Careers
and Internships and the Navitas English
Test Centre.
• Navitas Professional Institute: delivers
programs to build and enhance careers
in the Social, Community, Health and
Education sectors. The unit includes
ACAP, NCPS, HSA and ATTC.
• Training and Development: builds
capacity, core skills and employee
effectiveness in the resources sector
and related industries. This includes the
Navitas Resources Institute.
The Division continued to focus on academic
quality and student experience in the year.
Key achievements and highlights included:
• ACAP and NCPS students rated teaching
quality, learning response and skills
development above 85% in the National
Quality Indicators for Learning and
Teaching (QILT) survey; and
• Several Australian ELICOS colleges were
voted as the best in Australia in the 2016
i-Graduate Language Barometer survey of
over 11,000 students.
The Division continues to develop its human
capital, investing in executive capacity
through development programs and the
recruitment of experienced teachers and
administrators. This included significant work
in succession planning.
Growth
The Professional and English Programs
Division had another record year with a
3% increase in revenue to $229.9m (FY15:
$224.0m) and 19% growth in EBITDA to
$35.1m (FY15: $29.5m).
Much of this growth was delivered from
a solid performance from Careers &
Internships, ACAP and NCPS, as well as
operational efficiency. EBITDA margins
improved by 2.1% to 15.3%.
Growth in some colleges was restricted
by government reforms to the funding of
vocational education in Australia.
Efficiency
A focus on cost control and efficiency
continued in the year resulting in a reduction
in Divisional and operational costs. This
included improved class utilisation, an
increase in direct student recruitment and
improved mix of programs and courses.
Outlook
The Professional and English Programs
Division expects ongoing growth in FY17
though this will be moderated by the current,
relatively restrictive, vocational education
funding regime. Further reform is expected
in the coming year with Navitas contributing
to the development of a more sustainable
and equitable funding model. The Division
will also be re-tendering for the Adult Migrant
English Program contract which is due to
conclude on 30 June 2017.
28
Navitas Limited Annual Report 2016
REVIEW OF OPERATIONS:
SAE DIVISION
Key Highlights
• SAE recognised in an Australian
government survey for sector
leading student support and
engagement outcomes;
• Strong revenue growth in the US,
Germany and Australia;
• Expansion and relocation of key
growth campuses; and
• Closure of underperforming
campuses.
Financial Highlights
24.5
FY14
150.3
26.1
28.5
FY15
FY16
EBITDA ($m)
Revenue ($m)
185.5
202.8
SAE Colleges
54 Worldwide
SAE % of Divisional Revenue
$1,003.8m
SAE % of Divisional EBITDA
$200.8m
20%
57%
14%
68%
9
9
4
12
10
10
Germany/N EU
US
SW Europe
Southern
Licensed
UK
Navitas Limited Annual Report 2016 29
Overview of Operations
SAE is one of the world’s largest creative
media education companies, with 54
campuses across 28 countries. The
Division offers a range of predominantly
Higher Education opportunities including
Certificate, Diploma, Degree and Masters
programs across several major fields of
study: audio, film, animation, gaming, design,
and web. SAE also licenses its programs to
third party providers.
Quality
SAE participated in the National Quality
Indicators for Learning and Teaching
(QILT) survey in 2016, an independent
survey run for the Australian Department
of Education. SAE achieved some pleasing
results including outperforming Australia’s
top 5 universities on learner engagement
and student support. An Australian
destination survey of 2014 graduates also
found that over 85% of respondents had
secured employment.
SAE’s UK campuses also underwent Quality
Assurance Agency reviews with early
feedback indicating a successful outcome
and several commendations in regards to
academic quality.
Investment continued into both central and
regional management teams, improving the
knowledge and skill-sets of key employees.
Extensive succession planning and personal
development plans were also completed
across key management positions in
the year.
SAE also lodged an appeal to the adverse
ruling in the UK on the exemption of VAT on
its education courses which will likely be
heard in the next 12 months.
Efficiency
A number of campuses were relocated in
the year to allow further expansion including
SAE Perth, which relocated in late 2015,
and SAE Berlin which is mid-way through its
relocation. In addition, SAE announced the
proposed closure of four sub-scale colleges.
Growth
Outlook
SAE FY16 enrolments declined by 2% from
FY15 due to lower student volumes in the UK
and Europe. SAE recorded a 9% increase in
revenue to $202.8m (FY15: $185.5m) with
EBITDA also growing by 9% to $28.5m (FY15:
$26.1m) in the year. Second half growth was
impacted by slower volume growth in the US
and Europe and reforms by the Australian
government to vocational education funding.
The Division anticipates growth in student
volumes and pricing in its core markets in
FY17 though this growth will be somewhat
mitigated by decreases in Australian
enrolments in vocational programs.
30
Navitas Limited Annual Report 2016
STRATEGY AND
CORPORATE RESPONSIBILITY
This will be achieved via the three core pillars
of world class quality, capturing sustainable
growth and realising global efficiency.
Navitas aspires to become the trusted
partner to:
1. Students – by providing a safe, enjoyable
student experience, and delivering
academic outcomes that provide a clear
pathway into employment and a strong
return on investment.
2. Universities – by providing a consistent
stream of quality, diverse students
through long term strategic partnerships
that deliver mutual value creation.
3. Employers – by equipping learners with
the skills and experience required by
the modern workforce, and increasing
connectivity between employers
and students.
4. Governments – by developing a best
practice reputation in the private
education sector, and playing a
strategic partner role in the delivery of
education strategies.
5. Shareholders – by creating consistent
shareholder returns above market levels,
from low volatility earnings sources.
1. Deliver world class quality
Navitas aspires to develop strong, trusted
and mutually beneficial relationships as a
global leader in education. In FY16 this has
involved supporting Austrade to deliver
Australian International Education (AIE) 2025
objectives, and as a foundation partner of the
Australian EduGrowth accelerator. Navitas
will achieve greater alignment with University
partners, by creating strategic joint ventures
and supporting partners’ growth and
diversification strategies.
Navitas is a people based business, and
invests heavily to build the quality of its
workforce. This includes implementing
integrated talent frameworks, processes
and systems that will improve employees’
ability to meet student and partner needs.
Navitas has also commenced an executive
development program that provides world
class professional development for the
Company’s next generation of leaders.
To provide students with an unparalleled
learning experience, Navitas is investing
in the professional development of college
teams to enhance academic delivery. These
teams will be supported by a newly formed
global Learning and Teaching (L&T) function
that will leverage the global capabilities of the
L&T community, drive innovation and share
best practice to improve student retention
and progression rates.
2. Capture sustainable growth
Fundamentally FY16 has been a year of
positioning to develop Navitas’ platform for
further growth. Internally, restructuring to
create efficiency and best practice across
existing operations as well as the creation of
shared service centres to drive innovation
and leverage global scale. Externally,
pursuing organic growth opportunities,
preparing to invest in new business models
and the incubation of new technologies will
be the focus for FY17 and beyond.
3. Realise global efficiency
Navitas’ origins are as a distributed
organisation with individual colleges
developing strong local partnerships. Navitas
is now complementing these local strengths
with global efficiencies that are only available
to a company of such scale.
Operating Context
The International Education sector continues
to develop, with emerging market GDP per
capita growth increasing the affordability
of education and supporting an expected
60% increase of students seeking education
outside of their home country between 2015
and 20251.
The profile and needs of Navitas’
international students is equally evolving.
Students from a wider variety of countries
will access international education for the
first time, while millennials entering tertiary
education will demand flexible, mobile and
personalised learning options. Post education
employment prospects will become the
critical decision making factor, with students
choosing the course and institution that
delivers the greatest return on investment.
Globally, there is a mismatch between the
21st century skills needed by industry and
the capability of the current workforce.
Moving forward a population of lifetime
learners will seek the communication,
teamwork, critical thinking and problem-
solving capabilities needed to increase
adaptability and access new opportunities.
Navitas is well positioned to capture these
opportunities. As the largest pathway
provider in the world, the Company has a
suite of creative and employment focused
offerings that are well matched to the needs
of the transitioning global economy.
Strategy
Navitas’ core purpose remains as relevant
today as when the company was founded
in 1994 - to deliver quality student
outcomes and student experience through
strategic partnerships.
(1) International Trends in Higher Education, 2015,
University of Oxford
Navitas Limited Annual Report 2016 31
Navitas is currently implementing a
consistent and more efficient shared service
model across all Navitas Divisions and
regions focusing on the areas of property,
finance, IT and HR. The centralisation of
these core support services aims to improve
performance and best practice. Additional
initiatives to fully focus colleges on delivering
student outcomes and supporting partner
Risks
relationships are also being progressed.
University Partnerships conversions and
admissions centres are being developed in
Australia, the UK and North America to drive
best practice across the Division and improve
conversion rates and admission processes.
faster decision making, powerful analytics,
efficient processes, and improved
operations. This includes the global upgrade
of learning management systems, and the
global rollout of Navigate, a Navitas student
management system.
An overhaul of the Group’s core IT
infrastructure is being pursued to enable
Material business risks categorised under environmental, economic and social sustainability, and Navitas’ management of each risk as per
Navitas’ 2015 governance statement, can be summarised as:
Risk
Action
ECONOMIC SUSTAINABILITY
Competitor actions and
innovation adversely
affecting profitability
Navitas conducts internal reviews of existing service offerings and potential growth markets to maintain competitive
advantage and has a dedicated business intelligence function which provides:
• global insights into higher education trends;
Government actions lead
to a decline in revenue
Recruitment agents
do not comply with
regulatory requirements
SOCIAL SUSTAINABILITY
Damage to the Navitas
brand or reputation
Break down of
relationships with
universities and key
business partners
• monitoring service of mergers and acquisition activity in the higher education space;
• competitor analysis across Divisions; and
• use of data analytics to enhance service offerings.
Navitas has a dedicated function to liaise with government and industry. Navitas has also developed a government
relations strategy and regularly engages with governments and bureaucrats to manage any changes to policy.
Navitas has established policies and procedures in place based on the relevant legislation to manage the regulatory
requirements of its recruitment agents. In addition Navitas has a risk management system and internal audit program
which provides further oversight of compliance with regulatory requirements.
Various policies regarding media and social media as well as multiple systems and processes to manage reputational
issues have been embedded into the Navitas business in addition to a robust risk management system.
Systems and processes to manage reputational issues are being embedded into the Navitas business. Balanced
scorecard metrics to measure relationships with key stakeholders such as students, recruitment agents and
university partners are being developed to enable management to monitor the ongoing health of such relationships.
In addition Navitas has a risk management system and internal audit program which provides further oversight
of relationship management risk. In terms of social sustainability Navitas is positioned as a “trusted provider of
education” with the strategic objective of creating a long term enduring relationship with students and therefore a
socially sustainable business.
ENVIRONMENTAL SUSTAINABILITY
Navitas does not consider that the Company has material environmental sustainability risks
32
Navitas Limited Annual Report 2016
STRATEGY AND
CORPORATE RESPONSIBILITY
(CONTINUED)
Corporate Responsibility
Navitas has continued to progress its
corporate responsibility strategy and has
strengthened its reputation as a socially
responsible organisation alongside its
commitment to, and record of, high quality
academic outcomes.
Navitas’ corporate responsibility strategy
covers the wider categories of Our
Communities, Our People, Our Environment
and Our Customers. The strategy aligns
with current business objectives and is also
reflective of the significant interaction and
involvement that Navitas and individual
business units have had within their
communities for many years.
The strategy is mutually beneficial, delivering
benefits to global stakeholders and
participants while bringing long term benefits
to Navitas and Shareholders.
Contributing positively to
our community
The Navitas Education Trust (NET) was
established in 2013 as a vehicle for Navitas
to support charitable organisations and
activities. Navitas has committed to provide
annual funds to the NET, some of which
will be used to support education based
programs in partnership with charitable
organisations and some of which will
be invested to generate funds for future
programs.
The NET management committee, comprised
of three Board members and chaired by the
Group CEO, funded four initiatives in the
2016 financial year:
1. Supporting Room to Read to help rebuild
Nepal’s education system following the
devastating earthquakes in April 2015.
The NET funded Room to Read’s Literacy
instruction training program for 150-
200 teachers. Funding was also used to
provide learning materials needed for
teacher training sessions and necessary
supplies for the students to complete
their school work in some of the areas
hardest hit by the earthquakes;
2. For the 3rd year in a row supporting
ABCN to offer three-year scholarships
to Australian, high need, low SES, high
school students to support them to enter
higher education;
3. Working with Hagar to help educate
and re-integrate abused and trafficked
women and children in Afghanistan via the
Empower through Education Program; and
4. Funding Classroom of Hope to improve
the skills and resources of teachers,
school leaders and the community based
around seven schools in Battambang
province, Cambodia.
Navitas also supported a number of other
activities in the year including:
• Supporting more than 220 academic
scholarships worth over $1.0m. Navitas
also donated or raised funds totalling
$90,000 in the year;
•
77 employees volunteered 811 hours
across Australia participating in primary
and high school mentor programs in
partnership with ABCN. An additional 805
staff and student hours were volunteered
across a variety of other community
based projects in the year;
• More than 1,200 management hours
were committed to support corporate
responsibility activity in FY16;
• Navitas continued to sponsor Yearn
to Learn (Y2L), an established charity
in Beijing, China which develops fully
functional classrooms and therapeutic
facilities for children in orphanages
who do not have access to educational
programs due to their disability, age,
gender or circumstance; and
• Navitas supported Youth Focus, a
Western Australian based not-for-profit
organisation, to raise funds to prevent
youth suicide.
Supporting our people and being a
good employer
Navitas is committed to providing a safe and
productive workplace for its approximately
7,100 employees around the world and this
year has reported strong results on gender
representation in its diversity section in the
Corporate Governance statement (see the
Company's website: www.navitas.com/
organisation/investors).
Navitas has recently taken steps to enhance
its health and safety capabilities and is
developing a new management system
framework and policies to improve analysis
and performance. In FY16 Navitas’ Australian
operations reported:
Metric
Fatalities
Lost Time Injury Frequency
Rate (LTIFR) - number of
lost time injuries per million
hours worked
Prosecutions or Regulatory/
Improvement notices
FY16 FY15
0
0
2.27
2.30
0
0
Navitas also relaunched its Wellness, Health
and Safety program in FY16 with a focus on
protecting and enhancing health and wellness
for everyone who works, learns or visits with
Navitas. Navitas once again participated in
the Global Corporate Challenge with over
1,000 employees taking part in the 100 day
health and wellness initiative.
Ensuring environmental awareness
and sustainability
Although Navitas has a network of more than
130 campuses and colleges around the world
the majority of these are leased or owned
by partners. Within this constraint Navitas
aims to:
• Ensure sustainability is included in
design and construction guidelines,
and where possible, all design materials
will come from sustainable, low energy
use resources;
• Ensure that contractors used in
construction and maintenance
demonstrate sustainability credentials
as part of tender or contract
establishment; and
•
Introduce energy savings through the
introduction of energy efficient equipment
and education.
Navitas Limited Annual Report 2016 33
As a part of this sustainability
strategy Navitas:
• Has commenced measurement of
key environmental outputs such as
energy usage;
•
Is supporting its staff at a college level
by providing information about ways to
reduce energy consumption; and
• Has commenced monitoring the
generation of general waste at a college
level, with the view of finding ways to
improve waste management.
Ensuring positive outcomes for
students, clients and partners
Navitas utilises a range of annual surveys
and studies to monitor and ensure key
academic performance indicators are met.
External benchmarking involves comparing
key academic performance indicators across
Navitas colleges while internal benchmarking
takes place between the individual colleges
and their partner universities.
Within the University Partnerships Division,
pass rates and retention target rates (the
rate of students moving from semester to
semester) are set at greater than 75%. In the
2015 calendar year both of these targets
were exceeded with pass rates above 80%
and progression to partner rates over 90%.
Other student and client outcomes are listed
on pages 24-29.
Since 1995 total royalties paid to university
partners have exceeded $1.1billion. As a
leading global provider of education services
Navitas plays a vital economic role in its
communities. In FY16 wealth generated by
Navitas is distributed as follows:
$m
FY16
Change %
Operating revenue
Cost of services and other external costs
Total wealth created
Payments to university and consortium partners
Payments to teaching and academic employees
Payments to other employees
Payments to shareholders – dividends
Payments to governments – income taxes
Reinvested as depreciation, amortisation
and retained earnings
Total wealth distributed
Wealth Distributed (%)
1,010.7
(279.7)
731.0
175.3
241.3
154.8
74.1
37.3
48.2
731.0
3
6
2
0
2
5
1
(6)
4
2
7
5
24
$731.0m
University and
consortium partners
Teaching and academic employees
Other employees
Shareholders — dividends
Governments — taxes
33
Reinvested as depreciation,
amortisation and retained earnings
10
21
34
Navitas Limited Annual Report 2016
VALUESHARE INCENTIVE SCHEME
ValueShare Incentive Scheme
An important part of the spirit of Navitas has
always been sharing the success that the
business enjoys, with the staff that make
that success possible. Over the past ten
years, the primary way that the Company
has shared success with staff is through the
Navitas ValueShare Incentive Scheme.
The ValueShare Incentive Scheme helps
drive the success of the Company at four
important levels. It:
• helps attract and retain high quality staff;
• supports a merit-based culture by fairly
sharing with staff the financial success
Navitas enjoys;
• aligns the interests of staff with those of
Shareholders; and
•
rewards sustained gains.
Helps attract and retain high
quality staff
The success of Navitas' business ultimately
rests with the quality and the dedication of
the people who work at the Company.
To attract the best people, Navitas needs to
offer an engaging and enjoyable workplace
where the best in the education industry can
pursue their careers. But Navitas also needs
to offer a competitive level of remuneration.
Many of the educational institutions that
Navitas competes with for staff offer high
levels of fixed remuneration (eg salary plus
superannuation). Navitas tries to match that
by offering the opportunity to share in the
financial success of the business, via the
ValueShare Incentive Scheme.
For most participants in the Scheme, if
performance targets are met, an incentive
which is a percentage of their salary will
be earned.
As a result, in good years, Navitas staff may
earn more than what is on offer elsewhere
in the sector. But in disappointing years,
they may earn less. This performance based
approach to remuneration helps Navitas
attract a more entrepreneurial workforce
which has been one of the key drivers of the
Company's success.
It also means that one of the largest
expenses — employment costs — rises and
falls with the performance of each business
unit. If performance is good, Navitas shares
with staff that success, but if profitability
falls, then employment costs fall with it.
The ValueShare Scheme shares success with
staff which in turn further drives our success
Align the
interests of staff
with those of
shareholders
Help attract
and retain high
quality staff
Fairly share
with staff the
financial
success
we enjoy
This variability in Navitas' cost base has
helped the Company to successfully
negotiate some of the strong headwinds that
the Group has faced in the past.
Fairly shares with staff the
financial success Navitas enjoys
In this way rewards for senior staff operate
like a traditional long-term incentive plan,
with amounts uncapped, but with safeguards
in place, including deferral and the risk of loss
of deferred amounts if performance is not
sustained or the participant’s employment
is terminated.
High quality staff are attracted to a
transparent, objective process for sharing the
success that the business enjoys, one that
reflects the merit based culture that Navitas
has encouraged since its inception.
The formulaic nature of the Scheme
helps support the merit based culture
that Navitas has encouraged and once
again, tends to attract and support a more
entrepreneurial workforce.
To that end, rewards under the ValueShare
Incentive Scheme are determined by a
formula set for each business unit by the
Board, once every three years. This incentive
formula clearly sets out the rewards that
will be earned by participants at each level
of performance.
For most staff, rewards are limited at twice
the amount that they would receive for on-
target performance. But for a small group
of senior managers, rewards are uncapped
and any amount, positive or negative, may
be declared.
For these staff, amounts between $0 and
the amount they would receive for on-target
performance are paid in the months following
year end. Any amount outside this range is
settled in three equal parts, the first in the
current year and the remainder in the two
years that follow. Deferred amounts are
added to or offset against future declarations
and are forfeited if the staff member leaves
the Scheme.
Aligns the interests of staff with
those of Shareholders
While it is important to offer competitive,
performance-based pay to attract and
retain the best quality staff, the ongoing
success and sustainability of the business
is dependent on providing good returns
to Shareholders.
If the business is unable to generate an
attractive return on the capital entrusted to
it, Shareholders will look to place their money
elsewhere, starving the business of the
capital it may need to grow.
As a result, when Navitas' performance is
measured for the purposes of the ValueShare
Incentive Scheme, Navitas takes into account
not just the profits of the business, but what
investors could expect to earn elsewhere
on the capital entrusted to Navitas, at
comparable levels of risk.
Navitas Limited Annual Report 2016 35
Rewards are unlimited for some staff,
but can be lost if performance falls significantly
Incentive declared
Two-thirds of above
target declarations
are deferred
and can be lost
if performance
falls significantly
Performance
Negative declarations reduce
future payments
Target
Economic Value Added measures the value we create for shareholders
Economic Value Added
(the profit above and beyond
what investors could expect
to return elsewhere)
Profit made by
the business
during the year
Profit investors
could expect to
earn elsewhere at
comparable risk
CORPORATE
GOVERNANCE STATEMENT
The Corporate Governance Statement is available
at: navitas.com/investor_centre.Html.
The profit above and beyond what investors
could expect to earn elsewhere is called
‘Economic Value Added’ or EVA® for short
and rewards under the ValueShare Incentive
Scheme are linked to year on year growth
in EVA®.
Navitas’ Executive Key Management
Personnel are required to use 50%
of any rewards under the scheme to
purchase Shares in Navitas until they
hold a beneficial interest equivalent to
one year’s fixed remuneration (eg salary
plus superannuation).
Determining Incentive Outcomes
Every three years, the Board sets growth
targets for the Group and each business unit.
For the 2015-2017 period, the Group’s
growth target, if achieved, would represent
top 30% performance compared to the actual
three year EVA® growth achieved by the
top 300 Australian listed companies over
2009 – 20131. This equates to an increase
in the Group’s return on capital employed to
24% and a 13% improvement over the Group’s
current weighted average cost of capital
of 8%.
The three year target is then broken down
into annual growth targets. At the end of
each year, after consideration of the EVA®
growth achieved by the Group against its
targets, an incentive declaration for each
participant is determined. The total value of
at risk pay is approximately $18.0m in each of
the three years.
Incentive Outcomes in 2016
Whilst Navitas achieved an increase in
EBITDA during the year, the growth in EVA®
by the Group fell short of the target set by
the Board. As a result the Group’s return on
capital employed for the year to 30 June 2016
fell to 21.6% (FY15: 22.8%).
Rewards declared under the ValueShare
Incentive Scheme are based on the actual
financial performance of the business in any
one year. Rewards declared in 2016 reflected
the flow through effects of changes to the
MQC and SIBT on-campus contracts with
Macquarie University that were announced
in 2014.
Full details of the outcomes of the
ValueShare Incentive Scheme in 2016 are
included in the Remuneration Report, as part
of the Directors’ Report.
(1) excluding investment companies, as determined by
Juno Partners, an independent consultancy appointed by
the Board.
S T R I V I N G
F O R Q U A L I T Y
M A K I N G A C O N S I S T E N T E F F O R T T O B E O U R B E S T
S T R I V I N G
F O R Q U A L I T Y
M A K I N G A C O N S I S T E N T E F F O R T T O B E O U R B E S T
38
Navitas Limited Annual Report 2016
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2016
Revenue
Marketing expenses
Academic expenses
Administration expenses
Impairment of goodwill
Finance costs
Share of net loss of joint ventures accounted for using the equity method
Profit before income tax expense
Income tax expense
Profit for the year
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Net currency translation differences
Fair value movement in hedge instruments
Income tax relating to other comprehensive income
Other comprehensive income for the year
Total comprehensive income for the year
Profit attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interest
Earnings per share
Basic
Diluted
Note
2016
$000s
2015
$000s
2
1,010,651
980,341
3.2
3.2
(159,372)
(143,912)
(242,789)
(473,209)
-
(6,214)
(974)
(236,586)
(462,603)
(19,542)
(6,023)
-
128,093
111,675
3.4
(37,330)
(39,564)
90,763
72,111
5,969
(133)
1,042
(3,662)
(436)
(2,127)
6,878
(6,225)
97,641
65,886
90,078
685
71,810
301
90,763
72,111
96,175
1,466
66,351
(465)
97,641
65,886
3.6
Cents
Cents
24.0
24.0
19.1
19.1
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
Navitas Limited Annual Report 2016 39
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2016
Note
2016
$000s
2015
$000s
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments and other assets
Total current assets
Non current assets
Property, plant and equipment
Deferred tax assets
Investments accounted for using the equity method
Intangible assets
Total non current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Deferred revenue
Current tax payable
Provisions
Total current liabilities
Non current liabilities
Trade and other payables
Bank borrowings
Provisions
Total non current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Foreign currency translation reserve
Cash flow hedge reserve
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
TOTAL EQUITY
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
4.2
4.3
3.4
4.1
4.4
3.4
4.5
4.4
5.2
4.5
5.5
78,919
121,925
25,267
87,188
107,927
23,880
226,111
218,995
131,551
47,549
4,216
411,443
99,194
46,325
4,865
408,326
594,759
558,710
820,870
777,705
139,640
272,707
4,057
16,339
125,057
280,584
13,077
5,844
432,743
424,562
23,555
135,093
19,680
10,793
123,139
12,544
178,328
146,476
611,071
571,038
209,799
206,667
177,095
1,416
(2,013)
32,467
200,974
(4,774)
(1,920)
16,489
208,965
210,769
834
(4,102)
209,799
206,667
40
Navitas Limited Annual Report 2016
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income tax paid
Note
2016
$000s
2015
$000s
994,977
(819,161)
2,392
(6,071)
(46,327)
987,987
(795,005)
2,157
(6,208)
(47,097)
Net cash flows from operating activities
3.3
125,810
141,834
Cash flows from investing activities
Purchase of property, plant and equipment
Net cash paid for controlled entities
Net cash disposed on disposal of controlled entities
Purchase of other investments
4.3
(43,738)
-
(1,181)
(755)
(38,133)
(6,796)
-
(4,865)
Net cash flows used in investing activities
(45,694)
(49,794)
Cash flows from financing activities
Payments for share buy back
Proceeds from borrowings
Repayment of borrowings
Payments to non-controlling interests
Payment of dividends
Payment of dividends to non-controlling interests
5.5
3.5
(26,805)
354,742
(343,729)
-
(71,591)
(764)
-
337,014
(344,645)
(541)
(70,653)
(740)
Net cash flows used in financing activities
(88,147)
(79,565)
Net (decrease) / increase in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at beginning of the financial year
(8,031)
(238)
87,188
12,475
2,827
71,886
Cash and cash equivalents at the end of the financial year
78,919
87,188
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Navitas Limited Annual Report 2016 41
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
Foreign
currency
translation
reserve
$000s
Issued
capital
$000s
Cash flow
hedge
reserve
$000s
Retained
earnings
$000s
Non-
controlling
interests
$000s
Total
equity
$000s
Balance at 1 July 2014
197,868
380
(1,615)
17,973
(2,897)
211,709
Profit for the year
Fair value movement in hedge instruments (after tax)
Net currency translation differences (after tax)
Total comprehensive income for the year
Dividend reinvestment plan
Employee share plan purchase
Dividends paid
-
-
-
-
2,641
465
-
-
-
(5,154)
-
(305)
-
71,810
-
-
301
-
(766)
72,111
(305)
(5,920)
(5,154)
(305)
71,810
(465)
65,886
-
-
-
-
-
-
-
-
(73,294)
-
-
(740)
2,641
465
(74,034)
Balance at 30 June 2015
200,974
(4,774)
(1,920)
16,489
(4,102)
206,667
Profit for the year
Fair value movement in hedge instruments (after tax)
Net currency translation differences (after tax)
Total comprehensive income for the year
Dividend reinvestment plan
Employee share plan purchase
Share buy back
Disposal of controlled entities
Dividends paid
-
-
-
-
2,509
417
(26,805)
-
-
-
-
6,190
-
(93)
-
90,078
-
-
685
-
781
90,763
(93)
6,971
6,190
(93)
90,078
1,466
97,641
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(74,100)
-
-
-
4,234
(764)
2,509
417
(26,805)
4,234
(74,864)
Balance at 30 June 2016
177,095
1,416
(2,013)
32,467
834
209,799
Total attributable to:
Non-controlling interests – 30 June 2015
Non-controlling interests – 30 June 2016
-
-
-
-
-
-
-
-
(4,102)
834
(4,102)
834
Owners of the parent entity– 30 June 2015
Owners of the parent entity– 30 June 2016
200,974
177,095
(4,774)
1,416
(1,920)
(2,013)
16,489
32,467
-
-
210,769
208,965
Nature and purpose of reserves:
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign
subsidiaries and record foreign exchange gains and losses on the hedges of the net investments of foreign operations.
Cash flow hedge reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an
effective hedge.
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
42
Navitas Limited Annual Report 2016
1
Basis of preparation
This section sets out the accounting policies that relate to the financial statements of Navitas Limited (the “Company”) and its
controlled entities.
The financial report of the Company for the year ended 30 June 2016 was authorised for issue in accordance with a resolution of directors
dated 1 August 2016.
Navitas Limited, the ultimate parent, is a company limited by shares incorporated in Australia whose shares are publicly traded on the
Australian Securities Exchange.
1.1 Basis of accounting
Statement of compliance
The financial report complies with Australian Accounting Standards, and International Financial Reporting Standards ('IFRS') as issued
by the International Accounting Standards Board.
The financial report is a general purpose financial report, for a ‘for-profit’ entity, which has been prepared in accordance with the
requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the
Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except where noted.
The financial statements comprise the consolidated financial statements of the Navitas Group of companies.
Certain comparative information within the statement of financial position has been reclassified to be comparable to current
year presentation.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000’s) unless
otherwise stated.
Except as disclosed in notes 1.2 through to 1.5, the Company’s accounting policies are set out within each note disclosure.
1.2 Changes to accounting policies
Adoption of new and revised Accounting Standards
The Group has adopted all of the new and revised Standards and Interpretations, including amendments to the existing standards
issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current
reporting period.
The adoption of these amendments has not resulted in any significant changes to the Group’s accounting policies nor any significant
effect on the measurement or disclosure of the amounts reported for the current or prior periods.
During the year, the Group elected to early adopt AASB 9 Financial instruments issued in December 2014. At the same time, the
Group has also applied the amendments in AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB
9 (December 2010) (as amended), Part E of AASB 2014-1 Amendments to Australian Accounting Standards and AASB 2014-7
Amendments to Australian Accounting Standards arising from AASB 9 (December 2014).
AASB 9 replaces the provisions of AASB 139 Financial Instruments: Recognition and Measurement that relate to the recognition,
classification and measurement of financial assets and financial liabilities, the derecognition of financial instruments and
hedge accounting.
The key change for the Group associated with adopting AASB 9 relates to hedge accounting.
The Group has existing interest rate swap contracts in place in order to protect against rising interest rates as disclosed in note 5.4
which were entered into in the prior year. Hedge accounting was applied to these contracts in accordance with the provisions of AASB
139. During the current year, the Group entered into a cross currency basis swap which involves the conversion of Eur75m borrowings
into $109.4m of borrowings and swapping a Euro interest expense to an AUD interest expense which also qualifies for hedge
accounting. In accordance with AASB 139, applying hedge accounting to the overall arrangement would result in the dedesignation of
the existing interest rate swap contracts as hedging instruments and the crystallisation of existing hedge accounting losses into profit
or loss in the current year despite the arrangement being effective at protecting the Group against interest rate risk.
AASB 9 allows aggregated exposures, including the interest rate and cross currency swaps above, to qualify for hedge accounting
without a dedesignation of the Group’s existing hedging arrangement.
In the current year, the early adoption of AASB 9 has resulted in hedge accounting losses on the existing interest rate swap
arrangements of $1.672m remaining in equity and not being reclassified into profit or loss. AASB 9 has been applied retrospectively
and has had no impact on profit, net assets or cash flows in the previous financial year.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 43
1
Basis of preparation (continued)
1.2 Changes to accounting policies (continued)
Adoption of new and revised Accounting Standards (continued)
The early adoption of this new standard has not resulted in any significant changes to the Group’s accounting policies nor any
significant effect on the measurement or disclosure of the amounts reported for the current or prior periods other than that
noted above.
Accounting Standards and Interpretations issued but not yet effective
A project team exists to assess the impact of new standards and interpretations.
At the date of authorisation of the financial statements, significant new Standards and Interpretations that were issued but not yet
effective, which have not been early adopted are listed below:
Affected Standards and Interpretations
AASB 15 Revenue from Contracts with Customers
AASB 16 Leases
AASB 15 Revenue from Contracts with Customers
Application date
(reporting period
commencing on or after)
1 January 2018
1 January 2019
Application date
for Group
30 June 2019
30 June 2020
The new revenue standard replaces AASB 118 which covers revenue arising from the sale of goods and the rendering of services and
AASB 111 which covers construction contracts.
The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The
standard permits either a full retrospective or a modified retrospective approach for the adoption.
Management is currently assessing the effects of applying the new standard on the Group’s financial statements, however, it is not
expected that it will result in a significant change to the Group’s accounting policies.
AASB 16 Leases
The new leasing standard replaces AASB 117 Leases and requires that:
• All leases are ‘capitalised’ by recognising the present value of the lease payments and showing them either as lease assets (right-
of-use assets) or together with property, plant and equipment.
• A financial liability is recognised representing obligations to make future lease payments.
The standard permits either a full retrospective or a modified retrospective approach for the adoption.
Management is currently assessing the effects of applying the new standard on the Group’s financial statements. The impact of the
new standard will be dependent on the Group’s lease arrangements in place when the new standard is effective.
There are no other standards that are not yet effective and that would be expected to have a material impact on the Group in the current or
future reporting periods and on foreseeable future transactions.
1.3 Significant accounting judgements, estimates and assumptions
In applying the Group's accounting policies management continually evaluates judgements, estimates and assumptions based on
experience and other factors, including expectations of future events that may have an impact on the Group. All judgements, estimates and
assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results
may differ from the judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in
the preparation of these financial statements are outlined below:
Significant accounting judgements
In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those
involving estimations, which have the most significant effect on the amount recognised in the financial statements: Recoverability of
deferred tax assets (refer note 3.4).
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 44
Navitas Limited Annual Report 2016
1
Basis of preparation (continued)
1.3 Significant accounting judgements, estimates and assumptions (continued)
Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The
key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets
and liabilities within the next annual reporting period are: Impairment of goodwill and intangibles with indefinite useful lives (refer
note 4.1).
1.4 Basis of consolidation
The consolidated financial statements comprise the financial statements of Navitas Limited and its subsidiaries (as outlined in note 6.1) as
at and for the period ended 30 June each year (the Group).
Subsidiaries are all those entities over which the Group has control. Control is achieved when the Group has power over an entity and
is exposed to, or has rights over, the variable returns of the entity, as well as the ability to use this power to affect the variable returns of
the entity.
The financial statements of the subsidiaries are prepared for the same reporting period as Navitas, using consistent accounting policies. In
preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses
resulting from intragroup transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on
which control is transferred out of the Group.
A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction.
Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are presented
within equity in the consolidated statement of financial position, separately from the equity of the owners of the parent.
Losses are attributed to the non-controlling interest even if that results in a deficit balance.
Interests in joint ventures are accounted for using the equity method after initially being recognised at cost in the consolidated statement
of financial position.
Transactions and balances between the Company and its joint ventures were eliminated in the preparation of consolidated financial
statements of the Group to the extent of the Group’s share in profits and losses of the joint venture resulting from these transactions.
1.5
Foreign currencies
Functional and presentation currency
Both the functional and presentation currency of Navitas Limited and its Australian subsidiaries is Australian dollars ($). The functional
and presentation currency of the non Australian Group companies is the national currency of the country of operation.
Transactions & balances
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the
balance sheet date. Foreign currency differences arising on translation are recognised in the profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at
the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
Translation of Group companies’ functional currency to presentation currency
As at the reporting date the assets and liabilities of foreign subsidiaries are translated into the presentation currency of the Group at
the rate of exchange ruling at the reporting date and the statements of profit or loss and other comprehensive income are translated
at the weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to a
separate component of equity, the foreign currency translation reserve.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 45
2
Segment information
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses (including revenues and expenses relating to transactions with other components of the Group), whose operating results are
regularly reviewed by the Group’s Chief Executive Officer to make decisions about resources to be allocated to the segment and assess its
performance and for which discrete financial information is available. Management will also consider other factors in determining operating
segments such as the existence of a line manager and the level of segment information presented to the board of directors.
Operating segments for Navitas are:
University Partnerships:
The University Partnerships division delivers education programmes, via pathway colleges and managed
campuses, to students requiring a university education.
SAE:
The SAE division delivers education programmes in the area of creative media including courses in audio, film
and multimedia.
Professional and English
Programs (PEP):
The division delivers English language tuition, jobs skills training and higher and vocational education in health,
security and psychology.
Corporate:
Corporate is the aggregation of the Group’s corporate functions.
The Group accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices.
Segment revenues are attributed to geographic areas based on the location of the customers providing the revenues.
Segment accounting policies are the same as the Group’s policies.
2.1 Geographical areas
The Group operates in the following geographical areas.
External operating revenue
2016
$000s
2015
$000s
Non current assets*
2015
$000s
2016
$000s
Australia
United Kingdom
Europe
Asia
Canada
United States
Rest of World
629,561
95,013
62,211
37,336
78,868
99,962
5,484
628,881
84,365
59,277
49,434
66,478
84,617
5,089
170,458
228,666
97,892
10,172
174
39,076
772
355,721
8,070
96,803
12,007
214
40,022
227
Total
1,008,435
978,141
547,210
513,064
* Excludes deferred tax assets.
2016 operating revenue of $1,008.4m has been favourably impacted by the depreciation of the Australian Dollar compared to the previous
financial year. Using foreign exchange rates that applied in the 2015 financial year the Group would have recorded $25.0m lower revenue,
principally from United Kingdom and United States based operations.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 46
Navitas Limited Annual Report 2016
2
Segment information (continued)
2.2 Reportable segments
University
Partnerships
SAE
2016
$000s
2015
$000s
2016
$000s
2015
$000s
Professional and
English Programs
2015
$000s
2016
$000s
Corporate
Total
2016
$000s
2015
$000s
2016
$000s
2015
$000s
Revenue
Tuition services
Other services
525,821
510,183
189,769 173,321
222,964
216,806
-
-
938,554
900,310
45,274
56,157
13,053
12,129
6,970
7,203
4,584
2,342
69,881
77,831
Total segment revenue
571,095 566,340 202,822 185,450
229,934 224,009
4,584
2,342 1,008,435
978,141
Interest
(Other Corporations)
Total consolidated revenue
Result
EBITDA*
Depreciation
Amortisation
Goodwill impairment
Profit before tax and
net finance expense
Net finance expense
Share of net loss of
joint ventures
Profit before income tax
Income tax expense
Profit for the year
2,216
2,200
1,010,651
980,341
137,216
140,375
28,509
26,144
35,100
29,463 (36,244)
(32,875)
164,581
163,107
(5,919)
(4,901)
(13,683)
(12,538)
(3,472)
(3,830)
(7,693)
(6,049)
(30,767)
(27,318)
-
-
-
(16,438)
-
-
-
-
(749)
(749)
-
(3,104)
-
-
-
-
(749)
(749)
-
(19,542)
131,297
119,036
14,826
13,606
30,879
21,780 (43,937)
(38,924)
133,065
115,498
(3,998)
(3,823)
(974)
-
128,093
111,675
(37,330)
(39,564)
90,763
72,111
* EBITDA = earnings before net interest, taxes, depreciation, amortisation and impairment
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 47
3
Financial performance
This section focuses on the results and performance of the Group and includes disclosures explaining the Group’s results for the year,
significant items, taxation, earnings per share and dividends.
3.1 Revenue
Accounting policies
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be
reliably measured at the fair value of the consideration received.
In relation to the provision of education services, which is the Group’s primary activity, revenue is recognised where the contract
outcome can be reliably measured, the Group has control of the right to be compensated for the education services, and the stage
of completion can be reliably measured. The stage of completion is measured by reference to the number of contact days held as a
percentage of the total number of contact days in the course.
Where income is recorded in advance of the provision of service the full amount is recognised as deferred revenue in the statement of
financial position. Revenue is then recognised as outlined above.
3.2 Expenses
Accounting policies
Interest
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective
interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Depreciation
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
• Plant and equipment – over 2 to 10 years
• Leasehold improvements – the shorter of the lease term or the estimated useful life
The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end.
Leases
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term, except
where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are
consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The
aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 48
Navitas Limited Annual Report 2016
3
Financial performance (continued)
3.2 Expenses (continued)
Expense analysis by nature:
Finance costs
Bank loans and overdrafts
Depreciation and amortisation
Depreciation
Amortisation
Lease payments
Minimum lease payments – operating lease
Employee benefits expense
Employee benefits
Post employment benefits
Note
2016
$000s
2015
$000s
6,214
6,023
4.3
4.1
30,767
749
27,318
749
31,516
28,067
56,866
51,778
357,769
23,602
348,786
22,479
381,371
371,265
Losses
Impairment of goodwill
4.1
-
19,542
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 49
2016
$000s
2015
$000s
90,763
72,111
30,767
749
-
10,032
52
28
974
(1,427)
(9,571)
(1,383)
240
6,425
(2,485)
(9,247)
9,893
27,318
749
19,542
2,246
302
(1,303)
-
(2,515)
11,874
(3,967)
(9,453)
11,803
7,553
1,647
3,927
3
Financial performance (continued)
3.3 Reconciliation of profit to the statement of cash flows
Reconciliation of profit for the year to net cash flows from operating activities
Net profit for the period
Non cash items
Depreciation
Amortisation
Impairment of goodwill
Lease incentives
Net loss on disposal of property, plant and equipment
Net exchange loss/(gains)
Share of net loss of joint ventures accounted for using the equity method
Other non cash items
Decrease/(increase) in assets
Trade and other receivables
Prepayments and other assets
Deferred tax assets
Increase/(decrease) in liabilities
Trade and other payables
Deferred revenues
Current tax liabilities
Provisions
Net cash flows from operating activities
125,810
141,834
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 50
Navitas Limited Annual Report 2016
3
Financial performance (continued)
3.4 Taxation
This note sets out the tax accounting policies of the Group, the current and deferred tax charges or credits in the year (which together
make up the total tax charge or credit in the statement of comprehensive income), a reconciliation of profit before tax to the tax charge (or
credit) and the movements in the deferred tax assets and liabilities.
Accounting policies
Income tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively
enacted by the balance sheet date.
Deferred income tax is generally provided on all temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are recognised where management consider that it is probable that future taxable profits will be available to utilise
those temporary differences. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax
asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance
sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the profit or loss.
3.4.1 Income tax expense
2016
$000s
2015
$000s
Income tax recognised in profit or loss
Current income tax
Current income tax charge
Adjustments in respect of current income tax of previous years
(36,333)
(745)
(45,402)
(2,661)
Deferred income tax
Relating to the origination and reversal of temporary differences
(252)
8,499
Income tax expense reported in the statement of comprehensive income
(37,330)
(39,564)
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 51
3
Financial performance (continued)
3.4 Taxation (continued)
3.4.1 Income tax expense (continued)
The following table provides numerical reconciliation between aggregate tax expenses recognised in the statement of comprehensive
income and tax expense calculated per the statutory income tax rate.
2016
$000s
2015
$000s
Accounting profit before tax
128,093
111,675
At the Group’s statutory income tax rate of 30%
(38,428)
(33,503)
Adjustments in respect of current income tax of previous years
Non tax deductible goodwill impairment
Effect of local tax rates not at 30%
(745)
-
1,843
(2,661)
(5,863)
2,463
Income tax expense reported in the statement of comprehensive income
(37,330)
(39,564)
3.4.2 Recognised tax assets and liabilities
Note
2016
$000s
2015
$000s
Current income tax
Opening balance
Charged to income
Foreign exchange movements
Payments
Closing balance
Deferred income tax
Opening balance
Charged to income
Foreign exchange movements
Charged to equity
Closing balance
Deferred income tax relates to the following:
Deferred tax assets
Employee provisions
Other provisions
Lease incentives
Derivative instruments (swaps)
Unrealised foreign exchange losses
Carry forward tax losses
Other temporary differences
13,077
37,078
229
(46,327)
12,648
48,063
(537)
(47,097)
4,057
13,077
46,325
(252)
716
760
34,556
8,499
3,291
(21)
47,549
46,325
10,544
4,484
545
1,594
799
27,500
2,083
12,734
2,132
961
823
236
27,622
1,817
47,549
46,325
3.4.3
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 52
Navitas Limited Annual Report 2016
3
Financial performance (continued)
3.4 Taxation (continued)
3.4.3 Carry forward tax losses
Federal and State operating tax losses of $26.3m (2015: $24.3m) have been incurred by the Group’s US domiciled entities since
inception. These losses may be utilised in years through to 2034 for both US federal and US state purposes.
These losses are considered recoverable as management has determined that it is more likely than not that the Group will utilise these
losses through future profitable operations.
This assessment has been based on detailed financial forecasts prepared by management that have considered the:
• potential volume and price growth that can be achieved in the US business units over time,
•
•
•
•
favourable impact of economies of scale as volumes increase,
impact of further expansion within the US,
favourable impact of additional revenue streams within the US, and
time period that the tax losses are available to the US business units.
3.5 Dividends
3.5.1 Recognised amounts
Declared and paid during the year
Dividends on ordinary shares:
Final franked dividends for 2015: 10.1 cents (2014: 10.1 cents)
Interim franked dividend for 2016: 9.6 cents (2015: 9.4 cents)
2016
$000s
2015
$000s
38,009
36,091
37,947
35,347
74,100
73,294
During the year, the Company issued shares to a value of $2.509m (2015: $2.641m) in lieu of cash dividends under the dividend
reinvestment plan.
2016
$000s
2015
$000s
3.5.2 Unrecognised amounts
Dividends proposed and not recognised as a liability
Dividends on ordinary shares:
Final franked dividends for 2016: 9.9 cents (2015: 10.1 cents)
36,784
38,009
3.5.3 Franking credits
At balance date the value of franking credits available (at 30%) was $13.7m (2015: $12.5m).
3.6 Earnings per share
Net profit attributable to equity holders of the parent ($000s)
90,078
71,810
Weighted average number of ordinary shares for earnings per share (Number of shares)
375,582,803
376,053,714
2016
2015
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016
Navitas Limited Annual Report 2016 53
4
Assets and liabilities
This section shows the assets used to generate the Group’s revenue and the liabilities incurred as a result. Liabilities relating to the Group’s
financing activities are addressed in Section 5. Deferred tax assets and liabilities are shown in note 3.4.
On the following pages there are notes covering intangible assets, working capital, other non-current assets and provisions.
4.1
Intangible assets
Accounting policies
Goodwill
Goodwill acquired in a business combination is initially measured as the excess of the sum of the consideration transferred, the
amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the
acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is not amortised. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each
of the Group’s cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units.
Each unit or group of units to which the goodwill is so allocated:
1.
represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
2.
is not larger than an operating segment determined in accordance with AASB 8 Operating Segments.
Other identifiable intangible assets
Other identifiable intangible assets acquired separately or in a business combination are initially measured at cost. The cost
of an identifiable intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following
initial recognition, identifiable intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses.
The useful lives of these identifiable intangible assets are assessed to be either finite or indefinite. Identifiable intangible assets
with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the identifiable
intangible asset may be impaired. The amortisation period and the amortisation method for an identifiable intangible asset with a finite
useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate,
which is a change in accounting estimate. The amortisation expense on identifiable intangible assets with finite lives is recognised in
profit or loss in the expense category consistent with the function of the intangible asset.
Identifiable intangible assets with indefinite useful lives are not amortised. The useful life of an intangible asset with an indefinite life is
reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the
useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a
prospective basis
A summary of the policies applied to the Group's identifiable intangible assets is as follows:
Brand names (a)
Indefinite
Useful lives
Amortisation period and method used Not applicable
Internally generated/acquired
Recoverable amount testing
Acquired
Annually and where an indicator of
impairment exists.
Other (b)
Finite
Between 10 and 25 years – straight line
Acquired
Where an indicator of impairment exists.
Amortisation method reviewed at each
financial year end.
.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 54
Navitas Limited Annual Report 2016
4
Assets and liabilities (continued)
4.1
Intangible assets (continued)
Accounting policies (continued)
Other identifiable intangible assets (continued)
(a)
Brand names
Brand names include intangible assets acquired in the SAE business combination. This intangible asset has been assessed as
having an indefinite life on the basis of brand strength, ongoing expected profitability and the expectation of minimal ongoing
expenditure.
(b) Other
Other includes copyrights and licences acquired through business combinations, principally the acquisition of businesses within
the PEP division.
$000s
Gross carrying amount
Balance at 1 July 2014
Acquisition of controlled entity
Impact of foreign currency conversion
Balance at 1 July 2015
Acquisition of controlled entity
Disposal of controlled entities
Impact of foreign currency conversion
Goodwill
Brand
names
Other
Total
308,226
6,954
1,494
316,674
1,624
(7,179)
1,385
136,000
-
-
136,000
-
-
-
17,694
-
-
17,694
-
-
-
461,920
6,954
1,494
470,368
1,624
(7,179)
1,385
Balance at 30 June 2016
312,504
136,000
17,694
466,198
Accumulated amortisation and impairment losses
Balance at 1 July 2014
Amortisation expense
Impairment of goodwill
Balance at 1 July 2015
Amortisation expense
Disposal of controlled entities
Impact of foreign currency conversion
Balance at 30 June 2016
Net book value
At 1 July 2014
At 1 July 2015
At 30 June 2016
(34,183)
-
(19,542)
(53,725)
-
7,179
857
(45,689)
-
-
-
-
-
-
-
-
(7,568)
(749)
-
(8,317)
(749)
-
-
(41,751)
(749)
(19,542)
(62,042)
(749)
7,179
857
(9,066)
(54,755)
274,043
136,000
10,126
420,169
262,949
136,000
9,377
408,326
266,815
136,000
8,628
411,443
Foreign currency conversion of goodwill
Some goodwill balances are denominated in currencies other than Australian Dollars. In particular a substantial portion of goodwill
associated with the purchase of the SAE Group is denominated in Euro’s. These non-Australian Dollar balances are translated at the
rate applicable at the reporting date, into Australian Dollars and fluctuate in line with foreign exchange movements. The exchange
differences arising on the translation are taken directly to the foreign currency translation reserve.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 55
4
Assets and liabilities (continued)
4.1
Intangible assets (continued)
4.1.1 Impairment
Accounting policies
Impairment testing is completed at each reporting date for goodwill and intangible assets that have indefinite useful lives or assets
that are not ready for use, or more frequently if events or changes in circumstances indicate that the asset may be impaired.
For intangible assets that are subject to amortisation the asset is reviewed for impairment whenever events or changes in
circumstances indicate that the asset’s carrying amount is greater than its estimated recoverable amount. Indicators of impairment
may include changes in technology and business performance.
In testing for impairment, the recoverable amount is estimated for an individual asset or, if it is not possible to estimate the
recoverable amount for the individual asset, the recoverable amount of the cash generating unit (CGU) to which the asset belongs.
CGUs are the smallest identifiable group of assets that generate cash flows that are largely independent from the cash flows of other
assets or group of assets. Each CGU is no larger than an operating segment.
The recoverable amount of an asset or a CGU is the greater of fair value less cost of disposal and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the risks specific
to the asset or CGU and the market’s current assessment of the time value of money. An impairment loss is recognised in the income
statement if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses recognised in respect of
CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs) and then, to reduce the
carrying amount of the other assets in the CGU (group of CGUs).
Impairment losses recognised in respect of goodwill are not reversed. Impairment losses recognised in prior periods in respect of
other intangible assets are assessed at each reporting date for any indications that the impairment loss has decreased or may no
longer exist. The impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount
of the asset and is reversed only to the extent that the carrying amount of the asset does not exceed the carrying amount that would
have been determined, net of amortisation, had no impairment loss been recognised.
Impairment losses recognised
Year ended 30 June 2016
There were no impairment losses recognised in the year ended 30 June 2016.
Year ended 30 June 2015
Impairment testing of indefinite useful life assets, using a value in use calculation, for the year ended 30 June 2015 identified
goodwill balances of $19.5m that were not considered recoverable. These balances related to the University Partnership’s SIBT
($9.0m) (see below) and Study Overseas (SOL) ($7.4m) businesses and the Navitas Resources Institute (NRI) ($3.1m) in PEP.
In July 2014 Navitas announced that its wholly owned subsidiary, Sydney Institute of Business and Technology (SIBT), had reached
agreement with its partner, Macquarie University (Macquarie), that from February 2016 SIBT’s on campus pathway programs to
students would cease. From this point on Macquarie would offer its own pathway program to students.
As a result of value in use calculations performed for the SIBT cash generating unit, the goodwill recognised on the acquisition of
SIBT was determined to be not recoverable. A goodwill impairment charge of $23.3m was recognised as at 30 June 2014 and the
remaining carrying value of $9.0m was impaired during the 2015 financial year.
SOL, Navitas’ Indian based student recruitment arm, was fully impaired following sustained declines in performance over the last
few years and the recent announcement that the UK Home Office plans to bar non EU students from part time or post study work
rights. NRI goodwill, which primarily related to the acquisition of training entities in 2005 and which formed the NRI business unit,
was fully impaired due to sustained losses and the current difficult environment for the Mining and Resources sector.
Therefore a goodwill impairment charge of $19.5m was recognised as at 30 June 2015.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 56
Navitas Limited Annual Report 2016
4
Assets and liabilities (continued)
4.1
Intangible assets (continued)
4.1.1 Impairment (continued)
Impairment testing of goodwill and indefinite life identifiable intangible assets
Carrying amount of goodwill allocated to each of the cash generating units
The carrying amounts of acquired goodwill have been allocated to the following individual cash generating units that have
significant amounts of intangibles, for impairment testing, as follows:
Cash generating unit (or group of units)
Carrying amount of goodwill ($000s)
2016
2015
SAE
PEP, English and Foundation Skills
PEP, ELICOS
Curtin College
Deakin College
Australian College of Applied Psychology
Griffith College
Multiple units without significant intangibles
153,160
31,944
13,689
13,089
11,738
10,804
9,980
22,411
149,294
31,944
13,689
13,089
11,738
10,804
9,980
22,411
266,815
262,949
Value in use calculations for SAE
The recoverable amount of SAE has been determined based on a value in use calculation using cash flow projections covering a
five year period, based on bottom up financial forecasts prepared by local management and approved by SAE and Navitas Senior
Executives.
The following describes each key assumption on which management has based its value in use calculation for SAE.
• The discount rate applied to pre tax cash flow projections is 12.3%.
• Cash flows beyond the five year period are estimated using a terminal value calculated under standard valuation principles
incorporating a long term growth rate of 2.5%.
• Revenue from operations is forecast to increase as a result of increased volumes of students. This has been estimated as 10%
cumulatively over the five year forecast period. Weighted average forecast course fees have not been assumed to increase
significantly due to conservative estimates and changed country mix. Wage inflation is assumed to be in line with the long
run historical average for Australia, and EBITDA margins are forecast to improve in line with the long run average achieved by
established SAE schools.
• The impact of working capital has been assumed to increase in line with revenue growth.
• Capital investment required to run the business has been assumed based on detailed estimates for three years then at 5.0% of
forecast revenues.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 57
4
Assets and liabilities (continued)
4.1
Intangible assets (continued)
4.1.1 Impairment (continued)
Impairment testing of goodwill and indefinite life identifiable intangible assets (continued)
Value in use calculations for SAE (continued)
In addition, the cash flow projections for SAE also assumes the continued ability of existing and future students to access
government funding (loans) for the purpose of obtaining a qualification from a SAE school. This includes access to Title IV funding
in the USA and Fee-Help in Australia.
The implications of the key assumptions for the recoverable amount are:
• Discount rate - Management has considered the possibility that the discount rate used could increase. The recoverable
amount of SAE intangible assets would only be impacted if the discount rate increased by 20% or more.
• Long term growth rate - the recoverable amount of SAE intangible assets would only be impacted if the growth rate used was
lower than 1.0%.
• Forecast EBITDA for SAE would need to be 15% lower each year than used in the value in use model, over the five year forecast
period, either due to slower than forecast revenue growth or lower EBITDA margin, to result in a recoverable amount lower
than the carrying amount of SAE intangible assets.
The recoverable value of the SAE Brand Name of $136m has been assessed using the same methods and assumptions as the
related goodwill.
Value in use calculations for other cash generating units
The recoverable amount of these cash generating units has been determined based on a value in use calculation using cash flow
projections covering a five year period, based on financial forecasts approved by Navitas Senior Executives.
The following describes each key assumption on which management has based its value in use calculation for the remaining cash
generating units.
• The discount rate applied to pre tax cash flow projections is 11.4% and cash flows beyond the five year period are estimated
using a terminal value calculated under standard valuation principles incorporating a long term growth rate of 2.5%.
• Revenue from operations is forecast to increase due to increased volumes of students and fee growth in line with historical
performance. Wage inflation is assumed to be in line with the long run historical average, and forecast EBITDA margins are
assumed to be stable, and in line with the long run average achieved by the established cash generating units.
In addition, the cash flow projections for the following cash generating units, also assume that significant partnership or service
delivery contracts are renewed at the end of the current fixed contract period. If the contracts are not renewed on substantially
the same or similar terms and conditions then goodwill may be impaired.
Cash generating units subject to partnership or service
delivery contracts with fixed term, subject to renewal
Carrying amount of goodwill associated
with each cash generating unit ($000s)
PEP, English and Foundation Skills
Curtin College
Deakin College
Griffith College
Multiple units without significant intangibles
31,944
13,089
11,738
9,980
13,559
80,310
Except for loss of material contracts, there are no reasonably possible changes in key assumptions that would result in a material
impairment of intangible assets for these cash generating units.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 58
Navitas Limited Annual Report 2016
4
Assets and liabilities (continued)
4.2 Trade and other receivables
Accounting policies
Trade receivables, which generally have 30 to 60 day terms, are initially recognised at fair value and are subsequently measured
at amortised cost using the effective interest rate method less any provisions for expected impairment losses or actual
impairment losses.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off
when identified.
During the year, the Group early adopted AASB 9 Financial Instruments. As a result, the provision for impairment losses is now
calculated using an expected loss impairment model. There has been no significant financial impact arising from this change in
accounting policy.
Trade receivables
Allowance for doubtful debts
Accrued income
Other receivables
2016
$000s
2015
$000s
109,776
(5,254)
90,786
(5,121)
104,522
85,665
13,722
3,681
16,298
5,964
121,925
107,927
Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.
The Group is not exposed to significant credit risk due to the nature of revenue which is generally received in advance of the service
being provided. The maximum exposure to credit risk is the net carrying amount of receivables.
A significant portion of receivables is for student debts that are funded by monthly installments from Governments under student loan
arrangements. Subject to certain criteria being achieved by the student, Government funding has low credit risk.
In situations where revenues are not provided in advance of service, the Group trades only with recognised, creditworthy third parties,
and as such collateral is not requested nor is it the Group's policy to securitise its trade and other receivables.
It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an
assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each
individual customer in accordance with parameters set by the Board. These risk limits are regularly monitored.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 59
4
Assets and liabilities (continued)
4.3 Property, plant and equipment
Accounting policies
Plant and equipment is stated at historical cost less accumulated depreciation and any impairment in value.
Information in relation to depreciation of property, plant and equipment is included in section 3.2.
Gross carrying amount
Balance at 1 July 2014
Additions
Acquisition of controlled entity
Disposals
Exchange differences
Balance at 1 July 2015
Additions
Disposal of controlled entity
Disposals
Exchange differences
Closing balance at 30 June 2016
Accumulated depreciation
Balance at 1 July 2014
Depreciation expense
Disposals
Exchange differences
Balance at 1 July 2015
Depreciation expense
Disposal of controlled entity
Disposals
Exchange differences
Plant and
equipment
$000s
Leasehold
improvements
$000s
Total
$000s
59,137
18,912
7,575
(4,294)
6,727
88,057
15,066
(1,297)
(5,386)
(778)
95,662
(26,920)
(13,561)
4,107
(1,162)
(37,536)
(15,427)
1,094
4,678
1,447
92,301
19,221
-
(1,757)
2,310
112,075
47,565
-
(458)
1,792
151,438
38,133
7,575
(6,051)
9,037
200,132
62,631
(1,297)
(5,844)
1,014
160,974
256,636
(50,150)
(13,757)
2,247
(1,742)
(63,402)
(15,340)
-
318
(917)
(77,070)
(27,318)
6,354
(2,904)
(100,938)
(30,767)
1,094
4,996
530
Closing balance at 30 June 2016
(45,744)
(79,341)
(125,085)
Net book value
At 1 July 2014
At 1 July 2015
At 30 June 2016
32,217
50,521
49,918
42,151
48,673
81,633
74,368
99,194
131,551
The Group has contracted for capital expenditure in respect of property, plant and equipment but not recognised as liabilities at the
end of the reporting period totalling $21.283m.
4.3.1 Additions
During the year, the Group commenced commercial fitout of a new leased premises in Sydney Australia. This fitout is to be primarily
funded by lease incentives contributed by the landlord. As at 30 June 2016 $24.4m had been paid in relation to the lease fitout of
which $9.8m had been received from the landlord. The remaining balance will be received from the landlord during FY17.
Additions in the year ended 30 June 2016 include non-cash additions of $17.7m. These include a make good asset in respect of the
leased premise above of $8.4m and accrued fitout costs in respect of work performed during June 2016 of $7.3m.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 60
Navitas Limited Annual Report 2016
4
Assets and liabilities (continued)
4.4 Trade and other payables
Accounting policies
Trade payables and other payables have 30-60 day terms and are carried at amortised cost and represent liabilities for goods and
services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to
make future payments in respect of the purchase of these goods and services.
Wages, salaries, annual leave
Liabilities for wages and salaries, including non monetary benefits, and annual leave expected to be settled within 12 months of the
reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the
amounts expected to be paid when the liabilities are settled.
Annual leave expected to be settled more than 12 months after the reporting date is measured as the present value of the expected
future payments, adjusted for future wage and salary levels, and are recognised in other payables.
Lease incentives
Lease incentives received under operating leases are recognised as a liability and amortised on a straight-line basis over the lease
term. Leasehold improvements that are funded by lease incentives are included in property, plant and equipment – refer note 4.3.
Trade and other payables
Current
Trade payables
Other payables
Lease incentives
Non Current
Lease incentives
2016
$000s
2015
$000s
22,916
113,528
3,196
20,411
100,995
3,651
139,640
125,057
23,555
10,793
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 61
4
Assets and liabilities (continued)
4.5 Provisions
Accounting policies
Provisions
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the balance sheet date. If the effect of the time value of money is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability. The increase in the provision due to the passage of time is recognised as a finance cost.
Make good
Under the terms of its lease agreements the Group must restore certain leased premises to their condition as at the commencement
of the lease.
The Group has incurred an increase in make good provisions due to a significant new office lease in Sydney, Australia.
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected
future payments to be made in respect of services provided by the employees up to the reporting date. Consideration is given to
expected future wage and salary levels, experience of employee departures, and periods of service.
Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to
maturity and currencies that match, as closely as possible, the estimated future cash outflows.
Current
Make good
Employee benefits
Non Current
Make good
Employee benefits
2016
$000s
2015
$000s
9,575
6,764
16,339
13,118
6,562
348
5,496
5,844
6,046
6,498
19,680
12,544
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 62
Navitas Limited Annual Report 2016
5
Capital structure and financing
This section outlines how the Group manages its capital structure and related financing costs, including its balance sheet liquidity and
access to capital markets.
The Directors determine the appropriate capital structure, specifically, how much is raised from shareholders (equity) and how much is
borrowed from financial institutions (debt) in order to finance the Group’s activities both now and in the future. The Directors consider
the Group’s capital structure and dividend policy ahead of announcing results and do so in the context of its ability to continue as a going
concern, to execute the strategy and to deliver its business plan.
5.1 Cash and cash equivalents
Accounting policies
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Tuition Fees held in Tuition Protection Service accounts in Australia
The Group is required to maintain, in Australia, separate bank accounts for funds received from international students prior to
commencement of their course (prepaid fees). As at 30 June 2016, the Group’s Australian operations held $47.9m (2015: $46.4m) in
prepaid fees for students who had not commenced studies with the Group, with a corresponding amount included in deferred revenue.
These funds are held in separate bank accounts until the student commences their course, at which point the funds may be used
to settle normal obligations of the Group. At all times, the Group must ensure that there are sufficient funds in these separate bank
accounts to repay prepaid tuition fees in full to all international students, in respect of whom tuition fees have been paid and who have
not yet commenced their course.
5.2 Borrowings
Accounting policies
All loans and borrowings are initially recognised at the fair value of the consideration received. Due to the nature of these borrowings,
the carrying amount of the Group’s borrowings approximate their fair value.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective
interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months after the balance date.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 63
5
Capital structure and financing (continued)
5.2 Borrowings (continued)
5.2.1 Summary of borrowing arrangements
At reporting date, the following banking facilities had been executed and were available.
Total facilities
Credit facility
Facilities unutilised at balance date
Credit facility
2016
$000s
2015
$000s
400,000
400,000
204,578
227,598
A total of $195.422m (2015: $172.402m) had been utilised of the total facility, split between lease rental and performance guarantees
of $60.329m (2015: $49.263m) and borrowings of $135.093m (2015: $123.139m) drawn in Australian Dollars, Euro, US Dollars and
Singapore Dollars.
The borrowings of $135.093m (2015: $123.139m) include $14.718m (2015: $14.180m) at floating interest rates and $120.375m (2015:
$108.959m) at fixed interest rates (via interest rate swaps – refer note 5.4.1).
The facilities are unsecured. The weighted average effective interest rate on the facilities was 3.03% (2015: 2.62%). Further details are
provided in note 5.4.
5.2.2 Leasing
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
Operating leases - Group as lessee
The Group has entered into commercial leases on certain premises. These leases have an average life of between 3 and 12 years with
options to renew in some cases. There are no restrictions placed upon the lessee by entering into these leases.
Future minimum rentals payable
Within one year
After one year but not more than five years
More than five years
2016
$000s
2015
$000s
58,112
195,443
243,240
58,225
230,590
251,116
496,795
539,931
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 64
Navitas Limited Annual Report 2016
5
Capital structure and financing (continued)
5.3 Capital risk management objectives and policies
When managing capital it is management’s objective to maximise the returns to shareholders as measured by Economic Value Added
(EVA®), whilst also ensuring that the entity continues to operate as a going concern.
EVA measures the profits earned by the business after charging for the funds invested by both lenders and shareholders. Accordingly
management aims to maintain a capital structure that ensures the lowest cost of capital for the Group, and maximises returns to
shareholders from their capital investment.
Management regularly review capital structure to ensure that the Group takes advantage of favourable costs of capital. As the
market is constantly changing, management will: actively review the amount of dividends to be paid to shareholders, return capital to
shareholders, issue new shares, and initiate on market share buy backs, and drawdown on/repay bank borrowings to ensure that capital is
managed appropriately.
The Group operates globally, primarily through subsidiary companies established in the markets in which the Group trades. None of the
Group’s entities are subject to externally imposed capital requirements.
The Group’s policy is to borrow centrally, using a variety of currencies, to meet anticipated funding requirements.
Management monitors capital through the combination of leverage ratio (market value of net debt/total market value of capital) and return
on capital employed. The Group’s target leverage ratio is 10%. Under certain circumstances the actual ratio will be higher or lower than the
target, in which case, capital will be managed towards the target.
The Group’s leverage ratios at 30 June 2016 and 2015 were as follows:
Total borrowings
Less cash and cash equivalents
Net debt
Market Capitalisation
Market value of capital
Leverage ratio
EVA® Is a registered trademark of Stern Stewart & Co.
2016
$000s
2015
$000s
135,093
(78,919)
56,174
2,039,861
123,139
(87,188)
35,951
1,611,807
2,096,035
1,647,758
2.7%
2.2%
The leverage ratio at balance date is lower than the average over the financial year as this is the annual low point for net debt. Seasonality is
driven by the timing of key student enrolment periods.
Management’s target for return on capital employed is a minimum return in excess of the Group’s weighted average cost of capital (WACC).
For 2016, the Group’s WACC was approximately 8% (2015: 8%). Returns on capital employed were 21.6% (2015: 22.8%) from continuing
operations; well above the Group’s WACC.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 65
5
Capital structure and financing (continued)
5.4 Financial risk management objectives and policies
The Group’s principal financial instruments comprise receivables, payables, bank loans, cash and cash equivalents and derivatives.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Such assets are carried at amortised cost using the effective interest method less impairment. Gains and losses are recognised in profit or
loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the Group's Treasury
policy. The objective of the policy is to support the delivery of the Group's financial targets whilst protecting future financial security.
The Group may enter into derivative transactions, principally interest rate swaps and forward currency contracts. The purpose is to manage
the potential interest rate and currency risks arising from the Group's operations and its sources of finance. Derivatives, specifically
in forward currency contracts, may also be entered into. These derivatives provide economic hedges, but may not qualify for hedge
accounting and are based on limits approved by the Audit and Risk Committee. There are no economic hedges at 30 June 2016.
The main risks that may arise from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk.
The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels
of potential exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate and foreign exchange
rates. Where material, ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, liquidity risk is
monitored through the development of future rolling cash flow forecasts and maintenance of appropriate credit facilities.
The Audit and Risk Committee periodically reviews the policies for managing each of these risks as summarised below.
Risk exposures and responses
5.4.1 Interest rate risk
At reporting date the Group had the following mix of financial assets and liabilities exposed to interest rate risk:
Financial assets
Cash and cash equivalents
Financial liabilities
Bank borrowings
Net exposure
Variable interest rate risk
Fixed interest rate risk
(after interest rate swap)
2016
$000s
2015
$000s
2016
$000s
2015
$000s
78,919
87,188
-
-
14,718
14,180
120,375
108,959
64,201
73,008
(120,375)
(108,959)
The Group’s exposure to market interest rates relates primarily to the Group’s long term borrowing obligations with a floating interest
rate. The level of debt is disclosed in note 5.2. The Group’s debt facilities allow borrowings in multiple foreign currencies, accordingly,
interest rates on interest-bearing loans of the Group currently range from 0.5% to 3.2% (2015: 1.3% to 3.4%).
The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt, and that between 50% and 75% of core
borrowings must be at fixed rates of interest. Core borrowings is defined as the lowest level of borrowings forecast in the Group’s
forward projections.
In the absence of fixed rate debt the Group’s policy allows for the use of interest rate swaps, collars and caps. Where the Group enters
into fixed rate debt it is understood that this creates a fair value exposure as a by-product of the Group’s attempt to manage its cash
flow volatility arising from interest rate changes.
The Group has entered into interest rate swap contracts, in order to protect against rising interest rates, under which it has a right to
receive interest at variable rates and to pay interest at fixed rates. At 30 June 2016 the value of interest rate swap contracts held was
$132.105m (2015: $128.959m).
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 66
Navitas Limited Annual Report 2016
5
Capital structure and financing (continued)
5.4 Financial risk management objectives and policies (continued)
Risk exposures and responses (continued)
5.4.1 Interest rate risk (continued)
The following swaps have been in place for both the current and the previous financial year:
• Euro interest swaps at 0.71% maturing in February 2018.
• AUD interest swaps at 3.49% maturing in February 2018.
The interest rate swaps require settlement of net interest receivable or payable each month. The settlement dates coincide with the
dates on which interest is payable on the underlying debt. All swaps are matched directly against the appropriate loans and interest
expense and as such are considered highly effective. They are settled on a net basis. The swaps are measured at fair value and all
gains and losses attributable to the hedged risk are taken directly to equity and re-classified into profit or loss when the interest
expense is recognised.
During April 2016, the Group entered into a cross currency basis swap over Eur75m of borrowings, expiring in April 2018. The cross
currency basis swap is essentially a funding instrument that reduces the bank margin that the Group pays on its borrowings and is not
a trading instrument and provides a foreign currency hedge against historic assets acquired in Euros.
The cross currency basis swap involves the conversion of Eur75m borrowings into $109.4m of borrowings and swapping a Euro interest
expense to an AUD interest expense. On maturity in April 2018, the borrowings of $109.4m will be converted back to borrowings of Eur75m.
The fair values of the interest rate swap contracts and cross currency basis swap contracts are as follows:
Current liabilities – other payables
Interest rate swap contracts - cash flow hedges
Cross currency basis swap contracts - cash flow hedges
2016
$000s
2015
$000s
2,876
2,436
5,312
2,743
-
2,743
Interest rate swap contracts are exposed to fair value movements if interest rates change. Under these contracts the Group is
committed to $1.496m (2015: $1.488m) interest expense within 12 months, $1.057m (2015: $1.488m) interest expense between
1 year and 2 years, and $nil (2015: $1.110m) interest expense between 2 years and 5 years, on $132.105m (2015: $128.959m) of
notional debt (at rates as per above).
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing
positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest rates.
Sensitivity analysis
The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance sheet date.
At 30 June 2016, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit
and equity would have been affected as follows:
Judgements of reasonably possible movements
Post tax profit and equity higher/(lower) +1% (100 basis points)
2016
$000s
2015
$000s
449
504
The movements in profit and equity are due to a small decrease in interest revenues from variable rate cash balances and a small
increase in interest expenses on variable rate borrowings.
Management believe the balance date risk exposures are representative of the risk exposure inherent in the financial instruments.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 67
5
Capital structure and financing (continued)
5.4 Financial risk management objectives and policies (continued)
Risk exposures and responses (continued)
5.4.2 Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s
operating activities (when revenue or expense is denominated in different currency from the Group’s presentation currency)
“Transactional risk”, and the Group’s net investments in foreign subsidiaries “Translational risk”.
5.4.2.1 Transactional risk
During the 2015 financial year the Company changed its foreign currency risk policy to only hedge known and committed
exposures rather than forecast cashflows over a two year horizon. The policy was changed to benefit the business by increasing
certainty and reducing complexity.
5.4.2.2 Translational risk
The Group’s policy is to hedge its exposure to fluctuations on the translation of its foreign operations by holding net borrowings
in foreign currencies, where the unhedged exposure exceeds $10.0m. This is currently limited to the Group’s Euro, US Dollar and
Singapore Dollar exposures.
5.4.3 Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables, other
financial assets and derivative instruments. The Group's exposure to credit risk arises from potential default of the counter party, with
a maximum exposure equal to the carrying amount of these instruments.
The Group is not exposed to significant credit risk. See note 4.2.
5.4.4 Liquidity risk
The Group’s objective is to maintain a balance between the continuity of funding and flexibility through the use of operating cash flows
and committed available credit facilities.
During the 2015 financial year, the Group completed a refinancing of the Group’s existing debt facilities via a series of five year multi
currency bilateral revolving credit facilities. The new facilities increased the total facility limit to $400m and increased the term to
December 2019. These facilities are split into two tranches. Tranche A is $340m and wholly consists of credit facilities, whereas
Tranche B is $60m and can either be used as credit facilities or for guarantee requirements.
During the current year, in order to provide additional performance guarantees, Tranche B was increased to $70m and Tranche A was
reduced to $330m.
A total of $195.422m (2015: $172.402m) had been utilised of the total facility, split between lease rental and performance guarantees
of $60.329m (2015: $49.263m) and borrowings of $135.093m (2015: $123.139m).
Cash flows from operations for 2016 were $125.810m (2015: $141.834m).
The Group’s policy is that no more than 50% of credit facilities should mature within the following 12 months. At 30 June 2016, none
(2015: none) of the Group’s credit facilities will mature within the following 12 months.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 68
Navitas Limited Annual Report 2016
5
Capital structure and financing (continued)
5.4 Financial risk management objectives and policies (continued)
Risk exposures and responses (continued)
5.4.4 Liquidity risk (continued)
Contractual maturities
2016
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Borrowings
Cross currency basis swap
Interest rate derivatives
<3 months
$000s
3 months to a year
$000s
1 —5 years
$000s
Total
$000s
78,919
118,244
197,163
22,916
-
-
374
-
3,681
3,681
108,216
-
-
1,122
-
-
-
-
135,093
2,730
1,057
78,919
121,925
200,844
131,132
135,093
2,730
2,553
23,290
109,338
138,880
271,508
Net maturity
173,873
(105,657)
(138,880)
(70,664)
2015
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Borrowings
Interest rate derivatives
<3 months
$000s
3 months to a year
$000s
1 —5 years
$000s
Total
$000s
87,188
101,963
189,151
20,411
-
372
20,783
-
5,964
5,964
98,252
-
1,116
-
-
-
-
123,139
2,598
87,188
107,927
195,115
118,663
123,139
4,086
99,368
125,737
245,888
Net maturity
168,368
(93,404)
(125,737)
(50,773)
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 69
5
Capital structure and financing (continued)
5.4 Financial risk management objectives and policies (continued)
Risk exposures and responses (continued)
5.4.4 Liquidity risk (continued)
The tables above reflect all contractually fixed settlement, repayments, receivables and interest resulting from recognised financial
liabilities and assets, including derivative financial instruments, as of 30 June 2016. For derivative financial instruments the gross cash
settlement is presented where gross settlement occurs and the net cash settlement is presented where net settlement occurs. For
the other obligations the respective undiscounted cash flows for the respective upcoming fiscal years are presented. Cash flows for
financial liabilities are based on the earliest possible date on which the Group can be required to pay. Cash flows for financial assets
are based on the terms and conditions existing at the balance sheet date.
Management manages this liquidity risk by the maintenance of appropriate unutilised credit facilities and continued operation of
the business as a going concern generating operating cash flows. Whilst operating as a going concern, the material business units
of the Group receive operating cash flows prior to the provision of the service. At 30 June 2016, the Group had recognised deferred
revenue of $272.707m (2015: $280.584m), representing cash receipted by the Group for which tuition services had yet to be provided.
Management have utilised these cash receipts to reduce debt, return capital to shareholders, and to purchase investments. At 30
June 2016, the Group had $135.093m bank debt (2015: $123.139m) and had unutilised credit facilities of $204.578m available (2015:
$227.598m). Management is confident this is sufficient to cover any liquidity risk exposure at 30 June 2016.
5.5
Issued Capital
Movements in shares on issue
2016
2015
Shares
(Number)
$000s
Shares
(Number)
$000s
Movements in shares on issue
At 1 July
Dividend reinvestment plan (i)
Employee share schemes (ii)
Shares bought back on-market and cancelled (iii)
376,330,968
566,138
102,861
(5,440,614)
200,974
2,509
417
(26,805)
375,712,581
527,926
90,461
-
197,868
2,641
465
-
At 30 June
371,559,353
177,095
376,330,968
200,974
(i) Dividend reinvestment plan
During the year the Company issued 566,138 (2015: 527,926) shares to a value of $2.509m (2015: $2.641m) in lieu of cash dividends.
(ii) Employee share schemes
During the year the Company issued 47,265 (2015: 44,419) shares to executive employees (under the terms of the Executive Share
Plan) to a value of $0.192m (2015: $0.228m) in settlement of obligations arising from the Company’s ValueShare incentive scheme.
These obligations were previously recognised in the Company’s results for the 2015 and 2014 financial years. In addition, the
Company issued 55,596 (2015: 46,042) shares valued at $0.225m (2015: $0.237m) to eligible employees in lieu of salaries and wages
as part of the Company’s Employee Share Ownership Plan.
(iii) Share buy-back
On 2 February 2016, the Company announced an on-market buy-back of up to 7.5% of its ordinary shares currently on issue as part of
a capital management initiative.
In the period to 30 June 2016, the Company has purchased and cancelled a total of 5,440,614 ordinary shares. The shares were
acquired at an average price of $4.93 per share, with prices ranging from $4.58 to $5.18. The total cost of $26.805m was deducted
from issued capital.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 70
Navitas Limited Annual Report 2016
6 Other notes
6.1 Related party disclosures
6.1.1 Equity interests in related parties
The consolidated financial statements include the financial statements of Navitas Limited and its controlled entities. The table below
lists the primary operating controlled entities of the Group. Individual controlled entities that do not provide a significant contribution
to the Group’s revenue, profits or net assets have not been listed. All are owned 100% except as indicated.
Country of incorporation
Name
Australia
ACL Pty Ltd*
Australian Campus Network Pty Limited*
Australian College of English Pty Ltd*
Cadre Design Pty. Limited*
Colleges of Business & Technology (NSW) Pty Ltd*
Colleges of Business and Technology (WA) Pty Ltd*
Cytech Intersearch Pty Limited*
Educational Enterprises Australia Pty. Ltd.*
Educational Services Pty Ltd*
Hawthorn Learning Pty Limited*
Health Skills Australia Pty Ltd*
IBT (Canada) Pty Limited*
IBT (Sydney) Pty Limited*
IBT Education Pty Ltd*
IBT Finance Pty Limited*
Navitas SAE (UK) Holdings Pty Ltd (previously Institutes of
Business and Technology (UK) Pty Ltd)*
LM Training Specialists Pty. Ltd.*
Melbourne Institute of Business and Technology Pty Ltd*
Navitas America Pty Ltd*
* indicates member of the closed group
Rest of world
Fraser International College Limited
Curtin Education Centre Pte. Ltd. (90%)
Entities subject to class order relief
Navitas Bundoora Pty Ltd*
Navitas College of Health Pty Ltd*
Navitas College of Public Safety Pty Ltd*
Navitas English Pty Limited*
Navitas English Services Pty Limited*
Navitas LIS Holdings Pty Ltd (previously EduGlobal Pty Ltd)*
Navitas Professional Institute Pty Ltd*
Navitas Professional Pty Ltd*
Navitas Professional Training Pty Ltd*
Navitas SAE Holdings Pty Ltd*
Navitas USA Pty Ltd*
Newcastle International College Pty Ltd*
Perth Institute of Business and Technology Pty Ltd*
Queensland Institute of Business & Technology Pty Ltd*
SAE Institute Pty Limited*
South Australian Institute of Business and Technology Pty Ltd*
Sydney Institute of Business and Technology Pty Ltd*
The Australian Centre for Languages Pty Ltd*
The Learning Space Pty Ltd*
SAE-Institute GmbH
Pursuant to ASIC Class Order 98/1418, relief has been granted to certain of the entities which are indicated above as members of
the closed group (“closed group entities”) from the Corporations Act 2001 requirements for preparation, audit and lodgement of their
financial reports.
As a condition of the Class Order, Navitas Limited and the closed group entities entered into a Deed of Cross Guarantee on 15 June
2006, as varied from time to time. The effect of the deed is that Navitas Limited has guaranteed to pay any deficiency in the event of
winding up of any closed group entity. The closed group entities have also given a similar guarantee in the event that Navitas Limited
is wound up.
During the period, no entity has been:
•
•
removed by a revocation deed contemplated by the Deed of Cross Guarantee; or
the subject of a notice of disposal contemplated by the Deed of Cross Guarantee.
During the period, no entity obtained relief under the Class Order or a previous order at the end of the immediately preceding financial
year but which was ineligible for relief in respect of the relevant financial period.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 71
6 Other notes (continued)
6.1 Related party disclosures (continued)
6.1.2 Closed group disclosures
The consolidated statement of financial position and consolidated statement of profit or loss and other comprehensive income of the
entities which are members of the “closed group” are as follows:
Consolidated statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments and other assets
Total current assets
Non current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other financial assets
Total non current assets
Total assets
Current liabilities
Trade and other payables
Deferred revenue
Current tax payable
Borrowings
Provisions
Total current liabilities
Non current liabilities
Trade and other payables
Bank borrowings
Provisions
Total non current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Consolidated retained earnings
At 1 July
Profit attributable to members of the closed group
Dividends
Closed Group
2016
$000s
2015
$000s
52,189
77,905
13,581
56,084
66,003
14,760
143,675
136,847
76,835
20,112
327,367
313,838
738,152
881,827
119,578
163,049
1,743
108,067
16,716
409,153
-
135,093
18,824
153,917
563,070
318,757
177,095
(3,718)
145,380
318,757
119,020
100,460
(74,100)
41,541
18,821
328,116
313,064
701,542
838,389
79,490
175,161
9,301
114,466
5,705
384,123
1,257
123,139
11,796
136,192
520,315
318,074
200,974
(1,920)
119,020
318,074
114,808
77,506
(73,294)
At 30 June
145,380
119,020
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016
72
Navitas Limited Annual Report 2016
6 Other notes (continued)
6.1 Related party disclosures (continued)
6.1.2 Closed group disclosures (continued)
Consolidated statement of profit or loss and other comprehensive income
Revenue
Marketing expenses
Academic expenses
Administration expenses
Finance costs
Profit before income tax expense
Income tax expense
Profit for the year
Other comprehensive income/(expense)
Items that may be subsequently reclassified to profit or loss
Fair value movements in hedge instruments
Income tax relating to other comprehensive income
Other comprehensive income/(expense) for the year
Closed Group
2016
$000s
2015
$000s
661,089
649,289
(96,652)
(164,442)
(263,523)
(7,250)
(88,155)
(168,479)
(270,116)
(6,937)
129,222
115,602
(28,762)
(38,096)
100,460
77,506
(2,569)
771
(1,798)
(437)
131
(306)
Total comprehensive income for the year
98,662
77,200
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 Navitas Limited Annual Report 2016 73
6 Other notes (continued)
6.1 Related party disclosures (continued)
6.1.3 Transactions with other related parties
Transactions between the Group and its related parties
During the financial year, the following transactions occurred between the Group and its other related parties:
•
Minority shareholders were repaid $nil (2015: $540,677).
• Hoperidge Advisors Pty Ltd, an entity associated with Mr Rod Jones, is a sub tenant in one of the Group’s rented properties.
Navitas has recorded income of $64,388 (2015: $67,347) in relation to this contract. This contract is on normal terms
and conditions.
• Greenridge Electrical Pty Ltd, an entity associated with Mr Rod Jones, is a sub tenant in one of the Group’s rented properties.
Navitas has recorded income of $43,080 (2015: $nil) in relation to this contract. This contract is on normal terms and conditions.
• Navitas Limited has provided a loan to Western Sydney University International College Pty Limited, a joint venture company, of
$800,000. Interest is payable on the loan at a rate of the RBS cash rate plus a margin of 3% and is payable quarterly in arrears.
During the year, Navitas Limited has charged interest income of $12,798 on the loan and interest of $8,208 is outstanding at 30
June 2016. The loan is outstanding at 30 June 2016 and has no set repayment terms.
• Navitas Limited has charged services fees of $38,363 and provided marketing, staff and other services totaling $143,150 to
Western Sydney University International College Pty Limited, a joint venture company, during the year. At 30 June 2016, an amount
of $52,483 is outstanding.
• Navitas Limited has charged services fees of $1,288,415 and provided marketing, staff and other services totaling $117,353 to
University of Canberra College Pty Limited, a joint venture company, during the year. At 30 June 2016, an amount of $70,988
is outstanding.
Apart from the above, there were no balances, arising from transactions between the Group and its other related parties, outstanding
at reporting date.
All amounts advanced to or repayable to related parties are unsecured and are subordinate to other liabilities. The amounts
outstanding will be settled in cash.
6.1.4 Transactions with key management personnel
A list of key management personnel is provided in the remuneration report on page 80. Aggregate compensation and shareholdings
are provided on pages 85 to 88.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 74
Navitas Limited Annual Report 2016
6 Other notes (continued)
6.2 Parent entity disclosures
Financial information
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders equity
Issued capital
Reserves
Retained earnings
Total equity
Profit for the year
Total comprehensive income
6.3 Auditor’s remuneration
The auditor of Navitas Limited is Deloitte Touche Tohmatsu.
Audit services
Auditor of the Company
Deloitte Touche Tohmatsu (Australia)
Audit and review of financial reports
Other regulatory audit services
Overseas Deloitte Touche Tohmatsu firms
Audit and review of financial reports
Other regulatory audit services
Other Auditor
Audit and review of financial reports
Other services
Auditor of the Company
Deloitte Touche Tohmatsu (Australia)
Other – tax services
Parent
2016
$000s
2015
$000s
99,617
45,808
702,021
609,166
341,876
207,978
486,037
331,066
177,095
(3,718)
42,607
200,974
(1,920)
79,046
215,984
278,100
37,661
35,863
69,233
68,927
2016
$
2015
$
369,841
27,045
742,894
7,216
306,000
14,900
545,464
11,730
1,146,996
878,094
-
-
2,989
6,129
1,149,985
884,223
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016
Navitas Limited Annual Report 2016 75
7
Unrecognised items
7.1 Guarantees
The Group has entered into lease rental guarantees with a face value of $37.188m (2015: $25.554m) and performance guarantees with a
face value of $73.681m (2015: $80.880m). The fair value of the guarantees has been assessed as $nil based on underlying performance of
the entities subject to the guarantees.
Cross guarantees between entities in the closed group (see note 6.1.1) have been provided by Navitas Limited and its controlled entities.
The fair value of the cross guarantees has been assessed as $nil based on the underlying performance of the entities in the closed group.
7.2 Contingent liabilities
A UK subsidiary of Navitas is currently in dispute with HM Revenue & Customs in the UK as to whether the subsidiary provides exempt
education for the purposes of UK VAT. The matter has been heard by the First-Tier Tribunal (Tax and Chancery Chamber) and the Tribunal
ruled in Navitas’ favour.
HM Revenue & Customs subsequently sought leave from the First-Tier Tribunal to appeal this decision. This initial request to the First-Tier
Tribunal was rejected, although HM Revenue & Customs was granted specific leave to seek permission to appeal to the Upper Tribunal
(Tax and Chancery Chamber). HM Revenue & Customs applied for permission to appeal to the Upper Tribunal on 30 June 2014 and on 23
July 2014 this was refused. HM Revenue & Customs applied for this decision to be reconsidered at an oral hearing in 11 December 2014.
Permission to appeal to the Upper Tribunal (Tax and Chancery Chamber) was granted subsequent to this hearing. The appeal was heard in
December 2015 and the Upper Tribunal (Tax and Chancery Chamber) subsequently ruled in favour of HM Revenue & Customs.
Based on external legal advice, the UK subsidiary appealed to the Court of Appeal against this ruling and believe that there are good
prospects that the Court of Appeal will rule in Navitas’ favour on appeal. Should the Court of Appeal rule in favour of HM Revenue &
Customs the Group faces a potential VAT liability. As at 30 June 2016 the best estimate of such a liability is $5.35m, with a total potential
reduction in profits after tax of $4.28m.
8
Events after balance sheet date
Subsequent to balance sheet date, the directors of the Company declared a final dividend on ordinary shares in respect of the 2016
financial year. The total amount of dividend is $36.784m, which represents a fully franked dividend of 9.9 cents per share. The dividend has
not been provided for in the 30 June 2016 financial statements.
9
Changes in the Group’s structure
In July 2015 the Group disposed of its 55% share in EduGlobal China for nil consideration.
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 30 June 2016 E X H I B I T I N G
Q U A L I T Y
D E M O N S T R A T I N G B E L I E F I N O U R A B I L I T Y T O E X C E L
78
Navitas Limited Annual Report 2016
DIRECTORS’ REPORT
Your Directors submit their report for the year ended 30 June 2016.
During or since the financial year, the
Company has paid premiums in respect of a
contract insuring all the directors of Navitas
Limited against any of the following liabilities
incurred by the Director as a director, namely:
a) any liability which does not arise out of
conduct involving:
(i) a wilful breach of duty in relation to
the Company; and
(ii) a contravention of section 182 or
section 183 of the Corporations Act
2001, as permitted by section 199B
of the Corporations Act 2001; and
b) any liability for costs and expenses
incurred by the Director in defending
proceedings, whether civil or criminal,
whatever their outcome, and without
the qualifications set out in clause
(a) above.
The total amount of insurance contract
premiums paid is $192,317.
Directors
Committee Membership
The names and details of the Company’s
Directors in office during the financial year
and until the date of this report are set out on
pages 8 to 10. Directors were in office for this
entire period unless otherwise stated.
As at the date of this report, the Company
had an Audit and Risk Committee and a
People and Remuneration Committee.
Members acting on the committees of the
board during the year were:
Interests in the shares and
options of the Company and
related bodies corporate
As at the date of this report, the interests of
the Directors in the Shares and options of
Navitas Limited were:
Audit and risk
Tony Cipa
(Chairman)
Harvey Collins
James King
People and
remuneration
Tracey Horton
(Chairman)
James King
Diana Eilert
Directors
Harvey Collins
Rod Jones
Tony Cipa
Diana Eilert
Tracey Horton
Jim King
Lisa Paul*
* Appointed 2 February 2016
Ordinary
shares held
43,948
45,117,995
10,000
-
6,000
50,000
-
Directors’ Meetings
The number of meetings of Directors
(including meetings of committees of
Directors) held during the year, and the
number of meetings attended by each
Director, were as follows:
Indemnification and insurance of
directors and officers
The Company has made an agreement
to indemnify all the Directors against any
liability incurred by that Director in their
capacity as a director of the Company or a
subsidiary of the Company. The agreement
provides for the Company to pay an amount
to indemnify Directors only to the extent:
a)
b)
the Company is not precluded by law
from indemnifying the Directors; and
for the amount that the Director is not
otherwise entitled to be indemnified
and is not actually indemnified by
another person (including a related body
corporate or an insurer).
Directors’ meetings
Audit and risk
People and remuneration
Meetings of Committees
Number of
meetings held
while a director
7
7
7
7
7
7
2
Number of
meetings
attended
7
7
7
7
7
7
2
Harvey Collins
Rod Jones
Tony Cipa
Diana Eilert
Tracey Horton
James King
Lisa Paul*
* Appointed 2 February 2016
Number of
meetings
held while a
committee
member
6
-
6
-
-
6
-
Number of
meetings
attended
6
-
6
-
-
6
-
Number of
meetings
held while a
committee
member
-
-
-
5
5
5
-
Number of
meetings
attended
-
-
-
5
5
5
-
All Directors were eligible to attend all meetings held, unless specified.
Navitas Limited Annual Report 2016 79
Auditor’s Independence
Declaration
For the financial year ended 30 June 2016,
Navitas Limited applied to ASIC for relief
from section 324DA of the Corporations Act
(limitation on individual playing a significant
role for more than 5 successive years)
in relation to Andrew Timothy Richards
(Deloitte partner who had acted as the
lead auditor in relation to the audit of the
financial report of Navitas Limited for five
successive years, as at the financial year
ended 30 June 2015) because Ross Jerrard
(existing lead Deloitte partner at the time)
announced his resignation from Deloitte
and was due to leave Deloitte before 30
June 2016. Management felt that it would be
extremely challenging for another partner to
be able to become sufficiently familiar with
the Company’s business such that they could
conduct an effective audit of the financial
report for the period ended 30 June 2016.
Pursuant to ASIC Instrument 16-0281 dated
31 March 2016 (ASIC Declaration), ASIC gave
relief to Andrew Timothy Richards so that
subsection 324DA(1) of the Corporations
Act applied to him in relation to the audit
of Navitas Limited for the financial year
ending 30 June 2016 as if references in that
subsection to 5 successive financial years
were references to 6 successive financial
years on conditions that:
a) The directors of Navitas Limited have
resolved that Andrew Timothy Richards
be approved to play a significant role
in the audit of Navitas Limited for the
financial year ending 30 June 2016
(Board Approval);
b) The directors of Navitas Limited have
lodged with ASIC a copy of the resolution
referred to above for access on the
public register; and
c) Navitas Limited has advised ASIC in
writing that the directors’ report for the
financial year ending 30 June 2016 will
include details of, and reasons for, the
Board Approval and the effect of the
ASIC Declaration.
Subsequently, Board Approval was given by
way of a written resolution in accordance
with rule 12.8 of the Constitution and the
Company Secretary lodged a copy of that
resolution with ASIC.
The auditor’s independence declaration is set
on page 92 and forms part of the directors’
report for the financial year ended 30
June 2016.
Company Secretary
Dividends on Ordinary Shares
Hugh Hangchi, LLB, BComm
Appointed 27 April 2005
Mr Hangchi is a practising lawyer and has
experience in providing advice to directors
of listed and unlisted public companies in
relation to directors’ duties, the Corporations
Act, the Listing Rules and corporate
governance. He has also completed the
Company Directors Course Diploma.
Prior to joining the Company, Mr Hangchi
was a senior associate at a national law firm
where he specialised in capital raisings,
mergers and acquisitions and regulated
takeovers. He has also worked as a
solicitor with the Australian Securities and
Investments Commission.
Matthew Rumpus, LLB (Hons), BComm
Appointed 14 January 2016
Mr Rumpus is a practising lawyer and has
experience in providing advice to directors
of listed public companies in relation to
directors' duties, the Corporations Act, the
Listing Rules and corporate governance.
Prior to joining the Company, Mr Rumpus was
a special counsel at a global law firm where
he specialised in corporate law including
corporate governance, equity capital markets
and mergers and acquisitions.
Corporate Information
Corporate structure
Navitas Limited is a company limited by
shares that is registered and domiciled in
Australia. Navitas Limited has prepared a
consolidated financial report incorporating
the entities that it controlled during the
financial year as listed in note 6 of the
financial statements.
Nature of operations and
principal activities
The principal activities during the financial
year of the Group were of the provision
of educational services to domestic and
overseas students. There have been no
significant changes in the nature of those
activities during the year.
Operating and financial review
A review of the Group’s operations and
financial performance has been provided on
pages 14 to 29.
Cents
9.9
$000s
36,784
9.6
36,091
10.1
38,009
Final dividend
recommended
Interim dividend paid
during the year
Final for 2015 shown as
recommended in the
2015 report
Significant changes in the
state of affairs
There has been no significant change in the
state of affairs of the Company.
Subsequent to balance sheet date, the
Directors declared a final dividend on
ordinary shares in respect of the 2016
financial year. The total amount of dividend is
$36.784m, which represents a fully franked
dividend of 9.9 cents per Share. The dividend
has not been provided for in the 30 June 2016
financial statements.
Future Developments
Likely developments in, and expected results
of the operations of the Group in subsequent
years are referred to elsewhere in this report,
particularly on pages 14 to 29. In the opinion
of the Directors, further information on those
matters could prejudice the interests of the
Company and the Group and has therefore
not been included in this report.
Environmental Regulation
and Performance
The Group’s operations are not subject to any
significant environmental regulations under
the government legislation of the countries
it operates in. The Board believes that the
Group has adequate systems in place for
the monitoring of environmental regulations
and is not aware of any such regulations that
apply to the Group.
Rounding
The amounts contained in this report and
in the financial report have been rounded
to the nearest $1,000 (where rounding is
applicable) under the option available to the
Company under ASIC Class Order 2016/191.
The Company is an entity to which the Class
Order applies.
Non Audit Services
Details of the amounts paid to the auditor of
the Company, Deloitte Touche Tohmatsu, and
its related practices for audit and non audit
services provided during the year are set out
in note 6.3.
80
Navitas Limited Annual Report 2016
DIRECTORS’ REPORT
(CONTINUED)
Remuneration Report
This report outlines the remuneration arrangements in place for the key management personnel
(Directors and executives) of Navitas Limited.
The following were key management personnel at any time during the reporting period and
unless otherwise indicated were key management personnel for the entire period.
(i) Directors
Harvey Collins
Non-Executive Chairman
Rod Jones
Tony Cipa
Diana Eilert
Group Chief Executive Officer and Managing Director
Non-Executive Director
Non-Executive Director
Tracey Horton
Non-Executive Director
James King
Lisa Paul
(ii) Executives
Non-Executive Director
Non-Executive Director (appointed 2 February 2016)
Members of the Navitas Leadership Team:
Patrick Brothers
Chief Development Officer
David Buckingham Chief Financial Officer (appointed 25 January 2016)
Mick Campbell
Lyndell Fraser
Chief Information Officer (appointed 23 May 2016)
Chief Executive Officer – Professional and English Programs (resigned
30 June 2016)
Neil Hitchcock
Group General Manager – IT (resigned 26 February 2016)
Bryce Houghton
Chief Financial Officer (resigned 30 September 2015)
Bev Hudson
Scott Jones
Rob Lourey
Paul Lovegrove
Chief Executive Officer – University Partnerships North America
(appointed 2 February 2016)
Chief Executive Officer – SAE
Group General Manager - Human Resources
Chief Executive Officer – University Partnerships Europe (appointed 2
February 2016)
John Wood
Chief Executive Officer – University Partnerships Australasia
Remuneration philosophy
The performance of the Company depends
upon the quality of its Directors and
executives. To prosper, the Company must
attract, motivate and retain highly skilled
Directors and executives.
To this end, the Company embodies
the following principles in its
remuneration framework:
• Provide competitive rewards to attract
high calibre executives;
• Link executive rewards to
Shareholder value;
• Have a significant portion of executive
remuneration ‘at risk’, dependent upon
meeting pre-determined performance
benchmarks;
• Mandatory requirement for senior
executives of the Company (Navitas
Leadership Team) to take at least 50%
of all incentive payments in the form of
ordinary shares in the Company
(until such executives hold a beneficial
interest in shares in the Company equal to
the value of their fixed remuneration); and
• Establish appropriate, demanding
performance hurdles in relation to
variable executive remuneration.
People and Remuneration Committee
The People and Remuneration Committee
of the Board is responsible for determining
and reviewing compensation arrangements
for the directors, the Group Chief Executive
Officer (Group CEO) and the senior
management team.
The People and Remuneration Committee
assesses the appropriateness of the nature
and amount of remuneration of Directors
and senior managers on a periodic basis by
reference to relevant employment market
conditions with the overall objective of
ensuring maximum stakeholder benefit from
the retention of a high quality board and
executive team.
Remuneration structure
In accordance with best practice corporate
governance, the structure of non-executive
Director and senior manager remuneration is
separate and distinct.
Use of remuneration consultants
During the year ended 30 June 2016, the
People and Remuneration Committee
appointed Ernst & Young (EY) and Juno
Partners as advisers to assist with a
review of the executive remuneration
arrangements. EY and Juno Partners were
engaged by, and reported to, the People and
Remuneration Committee.
No remuneration recommendations (as
defined by the Corporations Act) were
provided by EY or Juno Partners.
When remuneration consultants are engaged
by the Board, it has put in place procedures
to ensure remuneration recommendations
made by remuneration consultants are
free from undue influence by those KMP to
whom the recommendation relates. These
procedures include:
•
•
instructions for preparing remuneration
recommendations are only issued
to remuneration consultants by
the Chairman of the People and
Remuneration Committee or another non-
executive Director;
the role of employees in any
engagement regarding a remuneration
recommendation is limited to the
provision of information and opinions
Navitas Limited Annual Report 2016 81
on current and past practices and does
not include any participation in the
development of recommendations;
Senior Manager and Executive
Director Remuneration
•
remuneration recommendations by
remuneration consultants are made
directly to the People and Remuneration
Committee; and
• all remuneration recommendations made
by remuneration consultants are required
to include a declaration about whether
the remuneration recommendation is free
from undue influence by the members of
the KMP to whom it relates.
Non-executive Director
Remuneration
Objective
The Board seeks to set aggregate
remuneration at a level which provides
the Company with the ability to attract
and retain directors of the highest calibre,
whilst incurring a cost that is acceptable
to shareholders.
Structure
The Constitution and the ASX Listing Rules
specify that the aggregate remuneration
of non-executive directors should be
determined from time to time by a general
meeting. The latest determination was made
at the Company’s annual general meeting
on 23 November 2013 where shareholders
approved an aggregate remuneration of
$1,100,000. An amount not exceeding the
amount determined is then divided between
the Directors as agreed.
The Board considers advice from external
consultants as well as fees paid to non-
executive directors of comparable companies
when determining the remuneration. The
amount of aggregate remuneration and the
manner of apportionment will be reviewed
periodically, and the quantum will be subject
to approval by Shareholders.
Each Director receives a fee for being a
director of the Company. For Directors that
chair a board committee an additional fee
is also paid. The payment of additional fees
for chairing a committee recognises the
additional time commitment required by
Directors in leading the committee.
The remuneration of key management
personnel, including non-executive Directors,
for the year ending 30 June 2016 is detailed
on page 87.
Objective
The Company aims to reward executives
with a level and mix of remuneration
commensurate with their position and
responsibilities within the Company and
so as to:
• Reward executives for Company,
business unit and individual performance
against targets set by reference to
appropriate benchmarks;
• Align the interests of executives with
those of Shareholders;
• Link reward with the strategic goals and
performance of the Company; and
• Ensure remuneration is competitive by
market standards.
Structure
In determining the level and make up of
executive remuneration, the People and
Remuneration Committee considers the
market levels of remuneration paid to
executives of comparable companies.
Remuneration consists of the following
key elements:
• Fixed Remuneration
• Variable Remuneration (ValueShare
Incentive Scheme)
The proportion of fixed remuneration and
variable remuneration is established for
each senior manager by the People and
Remuneration Committee or the Group
Chief Executive Officer (as the case may
be). The fixed and variable components of
the remuneration of the key management
personnel are detailed on page 87.
Fixed Remuneration
Objective
The level of fixed remuneration will
be reviewed annually to ensure it is
commensurate with Company and individual
performance, as well as consistent with
market rates for comparable executive roles.
Structure
Fixed remuneration can be received in a
variety of forms, including cash and fringe
benefits such as motor vehicles and expense
payment plans. It is intended that the manner
of payment chosen will be optimal for the
recipient without creating undue cost for
the Company.
82
Navitas Limited Annual Report 2016
DIRECTORS’ REPORT
(CONTINUED)
Variable Remuneration
Objective
The ValueShare Incentive Scheme aims to
share with participants the financial success
delivered by the Group and in so doing, align
their interests with those of Shareholders.
An important part of the Company’s ongoing
success is its ability to attract and retain
the best talent in the education industry
and in the ten years since its inception, the
ValueShare Incentive Scheme has helped
Navitas achieve that goal.
Structure
The diagram below illustrates the structure of
the ValueShare Incentive Scheme. Further
detail is provided in the text that follows:
Captures all at-risk pay
Each participant in the ValueShare Incentive
Scheme is assigned a level of Target Variable
Pay (TVP) which is based on a percentage of
their fixed remuneration.
It is important to note that the ValueShare
Incentive Scheme comprises the entire at-risk
opportunity offered to Executive KMP and all
other staff who participate in at-risk incentive
schemes. Navitas does not offer any form of
equity based remuneration in addition to the
ValueShare Scheme, for example.
Based on shareholder value
The ValueShare Incentive Scheme is based
on sustained improvements in the financial
performance of the Group and its Business
Units, as measured by Economic Value
Added (EVA®).
EVA® measures the profit the business
makes above and beyond what investors
could expect to earn, had their funds been
invested elsewhere at similar risk. As
such, it is the value created by the business
for shareholders.
EVA® is more demanding than other profit
measures such as EPS or EBITDA as it
requires a reasonable return on equity to
be achieved before it becomes positive.
Research by independent consultancy Juno
Partners shows that only about 50% of the
top 300 Australian listed businesses generate
positive EVA® in any one year.
The Board sets the required return for
investors used to calculate EVA annually and
may, at its discretion, make amendments
to the statutory profit to calculate EVA®
without affecting the underlying integrity of
the scheme.
Varies with each business’
financial performance
Every three years, the Board sets growth
targets for the Group and each business
unit. For the 2015-2017 period, the Group’s
growth target, if achieved, would represent
top 30% performance compared to the actual
three year EVA growth achieved by the top
300 Australian listed companies over 2009
– 2013(1). This equates to an increase in the
Group’s return on capital employed to 24% and
ValueShare Incentive Scheme
a 13% improvement over the Group’s current
weighted average cost of capital of 8%.
The three year target is then broken down
into annual growth targets. At the end of each
year, after consideration of the EVA® growth
achieved by the Group against its targets,
an incentive declaration for each participant
is determined.
TVP payments are deferred and can be
forfeited if not sustained
For Executive KMP, rewards are uncapped
and any amount, positive or negative, may be
declared. For these participants, amounts
between $0 and their TVP are settled in the
current year. Any amount outside this range
is settled in three equal parts, the first in the
current year and the remainder in the two
that follow. Deferred amounts are added to
or offset against future declarations and can
be lost if the employee's participation in the
scheme ends for whatever reason, or if future
EVA® growth falls substantially below target.
Any deferred amounts do not vest in the
employee and are not paid on the termination
of their employment.
Incentive declarations can be negative
If EVA® growth falls substantially below
target, participants can suffer a negative
incentive declaration. In this instance, prior
year deferred amounts can be reduced or
lost altogether.
Target Variable
Pay (TVP)
x
EVA
performance
=
EVA incentive
declared
+/—
Individual
performance
=
Final
payment
TVP ranges from
10%—75% of fixed
pay depending
on responsibility
Corporate staff are tied
to the Group EVA result,
business unit staff are
tied to the business unit
and Group EVA result.
For participants with
TVP of 20% or more,
declarations are
uncapped on the upside
and the downside. For
others declarations to
0%–200% of TVP.
Individual performance
is determined by the
business unit managing
director, Chief Executive
Officer or Board (as the
case may be).
For participants with TVP
of 20% or more, if the
payment is in excess of
their TVP, two thirds of
the amount above
their TVP is deferred
at risk for two years.
EVA® is a registered trademark of Stern Stewart & Co.
(1) excluding investment companies, as determined by Juno Partners, an independent consultancy appointed by the Board.
Navitas Limited Annual Report 2016 83
Additional requirements
Remuneration Review
Incentive Outcomes in 2016
The aggregate of annual ValueShare
Incentive Scheme payments to Executive
Key Management Personnel is subject to the
approval of the Board.
An additional step is taken with the aim
of further strengthening the alignment of
Executive Key Management Personnel and
shareholders in the medium to long term.
For those executives, at least 50% of
the incentive payment is used to pay for
ordinary shares in the Company (at an issue
price calculated as a volume weighted
average market price for the 5 trading days
immediately before the date of issue) until
such executives hold a beneficial interest in
shares in the Company equal to the value of
their fixed remuneration. This ensures all
Executive Key Management Personnel have
a meaningful exposure to the performance of
Navitas shares, funded out of the proceeds of
their incentive payments.
Not a short-term incentive scheme
While payments under the ValueShare
Incentive Scheme are made in cash and
classified under the accounting standards
as 'short-term benefits' (due to the fact
that they will be paid within 12 months of
year end), there are a number of elements
in the Scheme that ensure rewards reflect
sustained, multi-year performance.
These include:
• payments reflect performance against a
set of three year targets;
•
two thirds of payments for above target
performance are deferred;
• deferred payments are subject to loss if
performance deteriorates significantly or
the employee ceases to be a participant
in the plan for whatever reason; and
• at least 50% of any payment must be used
to purchase shares until the executive has
established a holding in Navitas equal to
the value of their fixed remuneration.
In 2015 the Company commenced a review of
its remuneration arrangements. The purpose
of this review was to ensure Navitas retains
its stated objectives of rewarding executives
against benchmarks that are linked to the
Company’s strategic goals, aligned with
shareholder interests and competitive with
comparator market standards.
Preliminary outcomes of the review suggest:
the ValueShare Incentive Scheme remains
an appropriate vehicle for executive variable
reward; incentive funding will continue to be
determined by EVA; the incentive reserve will
be retained and there is scope to increase
the weighting of performance-related
compensation relative to fixed compensation
and to strengthen the importance of
stretching non-financial objectives as
performance measures for senior executives
in line with the Company’s strategic
objectives and good market practice.
This review will continue and any changes will
form part of remuneration arrangements for
the 2017 year onwards.
Economic Value Added (EVA®) calculation
Whilst Navitas achieved an increase in
EBITDA during the year, the growth in EVA®
by the Group fell short of the target set by
the Board. As a result the Group’s return on
capital employed for the year to 30 June 2016
fell to 21.6% (FY15: 22.8%).
Rewards declared under the ValueShare
Incentive Scheme are based on the actual
financial performance of the business in any
one year. Rewards declared in 2016 reflected
the flow through effects of changes to the
MQC and SIBT on-campus contracts with
Macquarie University that were announced
in 2014.
Final incentive payments are subject to
Board determination in September each year,
but for staff working in corporate positions
this will likely mean below target incentive
payments will be declared for the year ended
30 June 2016.
Cash bonuses for participants have been
provided for in the financial statements for 30
June 2016, but as noted above, are subject
to review and confirmation by the Board
in September.
2016
$000s
2015
$000s
EBITDA
Interest
Depreciation
Net Operating Profit Before Tax
Taxes at 30%
Net Operating Profit After Tax (A)
Capital Employed*
Cost of Capital
Capital charge (B)
+
–
=
–
=
x
=
A–B Economic Value Added (EVA)
Opening EVA
164,581
2,216
(30,767)
136,030
(40,809)
95,221
436,694
8%
34,935
60,286
62,861
163,107
2,200
(27,318)
137,989
(41,397)
96,592
421,642
8%
33,731
62,861
51,779
EVA® (decrease) / increase
(2,575)
11,082
* based on the average of month end net debt and equity balances throughout the year, after adjustments.
84
Navitas Limited Annual Report 2016
DIRECTORS’ REPORT
(CONTINUED)
Relationship of rewards to performance
In the opinion of the directors the Company’s remuneration policies have contributed to the Company’s success in creating shareholder value, as
demonstrated by the following table which has key measures of the Group’s earnings and shareholder returns over the last 10 years.
Economic Value Added (EVA®) ($m)
$60.29
$62.86
$51.78
$46.10
$38.12
$57.88
$54.53
$40.64
$27.29
$20.59
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
Dividends per Share –
paid and proposed (cents)
Dividends paid ($m)
19.5
19.5
19.5
19.5
19.5
20.7
$74.1
$73.3
$72.8
$72.8
$80.3
$68.7
18.8
$57.8
14.3
10.9
9.3
$40.1
$33.7
$31.5
Closing Share price (at 30 June)
$5.49
$4.29
$7.13
$5.77
$4.34
$4.03
$4.66
$2.73
$2.09
$1.89
Earnings per Share (cents)
24.0
19.1
13.7
19.9
19.5
21.7
18.8
14.3
10.8
9.3
Earnings per Share before amortisation
and impairment (cents)
Net profit after tax attributable to
members of the Company ($m)
Return on capital employed
Employment Contracts
24.2
24.5
22.1
20.0
19.8
22.9
19.4
14.6
12.2
10.6
$90.08
22%
$71.81
23%
$51.58
20%
$74.58
19%
$73.15
19%
$77.30
50%
$64.20
59%
$49.20
47%
$37.43
34%
$32.25
27%
A summary of the key employment contract terms for the executive key management personnel is provided below. None of the non-executive
Directors have an employment contract with the Company.
Key Management Personnel
Executive — John Wood^, Lyndell Fraser (resigned 30 June 2016), Neil Hitchcock (resigned 26 February 2016)
Termination by notice
Notice period (by
Executive/Company)
3 months
Termination payments
~
Term – no term specified
Termination for Material Change*
6 months by Company
2 months by Executive
3 months
* Material Change is defined as there being a material diminution in the employee’s responsibilities, or the employee is required to relocate outside their home state.
^ For this executive, a Material Change also includes where a third party acquires a controlling interest in the Company.
~ Instead of giving the notice set out in the table above, the Company may terminate by paying 3 months remuneration instead of the notice, or a combination of notice and payment.
Executive — Rob Lourey, Scott Jones, Patrick Brothers, Bev Hudson, Paul Lovegrove¥ (commenced 20 July 2015),
David Buckingham (appointed 25 January 2016), Mick Campbell (appointed 23 May 2016)
Termination by notice
Notice period (by
Executive/Company)
Termination payments
3 months
ω
Term – no term specified
¥ For this executive, the 3 month notice period by the Company applies during the first five years of employment.
ω The Company at its discretion, may pay the executive the equivalent amount of remuneration set out in the table above in lieu of notice of termination.
Navitas Limited Annual Report 2016 85
Executive — Bryce Houghton‡ (resigned 30 September 2015)
Notice period (by
Executive/Company)
Termination payments
Termination by notice
1 month
Termination for Material Change‡
1 month
In the event of termination by Company, final termination
payment equivalent to the fixed remuneration for a maximum
of 12 months or the balance of the
employment contract, whichever is greater
Final terminal payment equivalent to the fixed
remuneration for balance of the employment
contract
Term – 3 years, commencing from 19 July 2013.
‡ For this executive, a Material Change means where there is a material diminution in the remuneration of the employee, or the responsibilities and powers assigned to the employee.
Executive — Rod Jones
Termination by notice
Notice period (by
Executive/Company)
Termination payments
6 months
β
Term – no term specified
β Instead of giving the notice set out in the table above, the Company may terminate by paying remuneration equivalent to the notice period.
Remuneration and shareholdings of directors and other key management personnel
The aggregate compensation made to key management personnel of the Company and the Group is set out below:
Short term benefits
Post employment benefits
Other long term benefits
2016
$000s
2015
$000s
6,849
288
51
7,188
7,289
293
126
7,708
The detailed compensation of each member of key management personnel of the Group is set out on page 87.
86
Navitas Limited Annual Report 2016
DIRECTORS’ REPORT
(CONTINUED)
Shareholdings of key management personnel
The movement during the reporting period in the number of ordinary shares in Navitas Limited held, directly, indirectly or beneficially, by each key
management person, including their related parties, is as follows:
(i) Directors
Harvey Collins
Rod Jones
Tony Cipa
Diana Eilert (1)
Ted Evans (2)
Tracey Horton
James King
Peter Larsen (2)
Lisa Paul (3)
Balance at
1 July 2014
Additions
Disposals*
Balance at
30 June 2015
Additions
Disposals*
Balance at
30 June 2016
43,948
45,017,995
-
-
60,000
-
50,000
23,433,610
-
-
-
10,000
-
-
2,000
-
-
-
-
-
-
-
(60,000)
-
-
(23,433,610)
-
43,948
45,017,995
10,000
-
-
2,000
50,000
-
-
-
100,000
-
-
-
4,000
-
-
-
68,605,553
12,000
(23,493,610)
45,123,943
104,000
-
-
-
-
-
-
-
-
-
-
43,948
45,117,995
10,000
-
-
6,000
50,000
-
-
45,227,943
(1)
(2)
(3)
*
Appointed 28 July 2014
Resigned 4 November 2014
Appointed 2 February 2016
Shares held at date of resignation recorded as a disposal in above table.
(ii) Executives
Patrick Brothers (4)
David Buckingham (5)
Mick Campbell (6)
Lyndell Fraser (7)
Neil Hitchcock (8)
Bryce Houghton (9)
Bev Hudson (10)
Scott Jones (11)
Rob Lourey
Paul Lovegrove (10)
John Wood
Balance at
1 July 2014
Additions
Disposals*
Balance at
30 June 2015
Additions
Disposals*
Balance at
30 June 2016
-
-
-
52,637
103,161
87,009
-
-
1,334
-
122,321
-
-
-
23,352
2,309
-
20,000
7,562
-
-
366,462
53,223
-
-
-
-
-
-
-
-
-
-
-
-
-
-
75,989
105,470
87,009
-
2,320,136
8,896
-
122,321
6,973
21,550
-
19,184
-
-
-
10,000
11,202
-
-
-
-
-
(95,173)
(105,470)
(87,009)
-
(120,000)
-
-
-
6,973
21,550
-
-
-
-
-
2,210,136
20,098
-
122,321
2,719,821
68,909
(407,652)
2,381,078
(4) Appointed 10 November 2014
(5) Appointed 25 January 2016
(6) Appointed 23 May 2016
(7) Resigned 30 June 2016
(8) Resigned 26 February 2016
(9) Resigned 30 September 2015
(10) Appointed to the Navitas Leadership Team effective 2 February 2016
(11) Appointed to the Navitas Leadership Team effective 1 July 2014. Mr Jones’ balance at appointment was 2,300,136
*
Shares held at date of resignation recorded as a disposal in above table.
Navitas Limited Annual Report 2016 87
(a) Directors’ and Executives’ Remuneration
Short term benefits
2016
$
Salary &
Fees
Cash
bonus (i)
Non
monetary
benefits
Post-
employment
superannuation
Other
long term
benefit (ii)
Total
Performance
related %
Non-executive Directors
Harvey Collins
Tony Cipa
Diana Eilert
Tracey Horton
James King
Lisa Paul (1)
Executive Director (iv)
234,905
127,854
115,068
127,854
126,000
47,489
779,170
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,095
12,146
10,932
12,146
-
4,511
74,830
-
-
-
-
-
-
-
270,000
140,000
126,000
140,000
126,000
52,000
854,000
-
-
-
-
-
-
-
Balance of
Deferred
Cash
Bonuses
(iii)
-
-
-
-
-
-
-
Rod Jones
950,084
209,932
44,872
35,044
17,173
1,257,105
17%
39,670
Other key management personnel (iv)
Patrick Brothers
David Buckingham (2)
Mick Campbell (3)
Lyndell Fraser (4)
Neil Hitchcock (5)
Bryce Houghton (6)
Bev Hudson (7),(8)
Scott Jones (9)
Rob Lourey
Paul Lovegrove (7),(9)
John Wood
507,642
245,863
39,217
449,238
408,780
769,893
162,854
84,954
30,961
4,060
-
-
-
57,975
578,880
256,854
409,467
130,705
478,851
60,369
13,942
81,441
12,183
3,147
5,504
-
6,968
63,671
941
-
-
-
-
19,308
13,196
637,283
8,367
2,827
27,680
14,481
8,833
8,143
-
23,133
29,046
36,149
-
-
-
-
-
-
-
288,338
51,608
476,918
430,229
842,397
229,913
835,734
9,550
502,519
-
173,693
11,451
607,892
13%
11%
8%
-
-
-
25%
31%
12%
8%
13%
7,689
-
-
-
-
-
-
(3,279)
13,329
-
54,886
5,131,474
800,488
137,286
213,011
51,370 6,333,629
13%
112,295
5,910,644
800,488
137,286
287,841
51,370
7,187,629
11%
112,295
For notes (i) through (iv) see page 88.
(1) Appointed 2 February 2016
(2) Appointed 25 January 2016
(3) Appointed 23 May 2016
(4) Resigned 30 June 2016. Salary & fees includes a termination payment of $101,394
(5) Resigned 26 February 2016
(6) Resigned 30 September 2015. Salary & fees includes a termination payment of $515,591
(7) Appointed 2 February 2016
(8) Remuneration is settled in Canadian Dollars
(9) Remuneration is settled in Great British Pounds
88
Navitas Limited Annual Report 2016
DIRECTORS’ REPORT
(CONTINUED)
(a) Directors’ and Executives’ remuneration (continued)
Short term benefits
2015
$
Salary &
Fees
Cash
bonus (i)
Non
monetary
benefits
Post-
employment
superannuation
Other
long term
benefit (ii)
Total
Performance
related %
Non-executive Directors
Harvey Collins
Tony Cipa
Diana Eilert
Ted Evans (10)
Tracey Horton
James King
Peter Larsen (10)
Executive Director (iv)
234,191
126,927
107,147
47,833
125,287
127,014
39,241
807,640
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,809
12,058
10,179
-
11,902
-
12,625
82,573
-
-
-
-
-
-
-
270,000
138,985
117,326
47,833
137,189
127,014
51,866
890,213
-
-
-
-
-
-
-
Balance of
Deferred
Cash
Bonuses
(iii)
-
-
-
-
-
-
-
Rod Jones
987,069
977,050
6,398
36,533
10,004 2,017,054
48%
79,339
Other key management personnel (iv)
Patrick Brothers (11)
Lyndell Fraser
Neil Hitchcock
Bryce Houghton
Scott Jones (12),(13)
Rob Lourey
John Wood
239,220
372,520
361,634
435,100
508,261
397,897
479,234
107,367
210,074
198,419
345,710
215,560
207,145
357,596
19,899
-
588
54,147
-
-
588
12,209
18,783
18,783
35,958
18,783
34,608
35,084
-
42,347
13,949
34,820
-
10,546
13,959
378,695
643,724
593,373
905,735
742,604
650,196
886,461
3,780,935
2,618,921
81,620
210,741
125,625 6,817,842
4,588,575
2,618,921
81,620
293,314
125,625 7,708,055
28%
33%
33%
38%
29%
32%
40%
38%
34%
15,378
93,026
15,139
25,131
(6,557)
26,659
109,772
357,887
357,887
(10) Resigned 4 November 2014
(11) Appointed 10 November 2014
(12) Appointed 1 July 2014
(13) Remuneration is settled in Great British Pounds
(i)
Cash bonus comprises the annual incentive (ValueShare Incentive Scheme) payments payable in September of each financial year after review and confirmation by the Board. Under
the terms of the scheme payments will only be made if the participant is an employee at the date of payment. The cash bonus includes the amount provided as payable in relation to the
2016 financial year, adjusted for the difference between the amount provided for in the 2015 financial year and the actual amount paid in September 2015.
(ii) Other long term benefits include movements in Long Service Leave.
(iii) Deferred Cash Bonuses are the balances for key management persons (KMP) who hold a position as KMP at 30 June, and who are participants in the incentive scheme. As noted on
page 82 of the Directors’ Report, for some participants in the ValueShare Incentive Scheme, rewards outside of the range of $0 to the participant’s Target Variable Pay are settled in
three equal parts, the first in the current year and the remainder in the two that follow. The Balance of Deferred Cash Bonuses is the total of these deferred amounts. It does not vest
with the executive. The executive is not entitled to any portion of the Balance of Deferred Cash Bonuses upon termination. For the purposes of the remuneration report the Balance of
Deferred Cash Bonuses does not form part of compensation for the year.
(iv) For these executives, at least 50% of the incentive payment will be used to pay for ordinary shares in the Company (at an issue price calculated as a volume weighted average market
price for the 5 trading days immediately before the date of issue) until such executives hold a beneficial interest in shares in the Company equal to the value of their fixed remuneration.
This requirement will be determined based on shareholdings in the Company as disclosed by these executives in August of each financial year. It is therefore not currently possible to
quantify the component of the cash bonus that will be used to buy ordinary shares in the Company.
Independent Audit and Remuneration Report
The required disclosures as included on pages 80 to 88 of this remuneration report have been audited by Deloitte Touche Tohmatsu.
The directors’ report, including the remuneration report, is signed in accordance with a resolution of the Directors.
R JONES
Group Chief Executive Officer and Managing Director
Perth, Western Australia, 1 August 2016
Navitas Limited Annual Report 2016 89
E N V I S I O N I N G
Q U A L I T Y
F O C U S I N G O N A M E N T A L P I C T U R E
O F O U R S U C C E S S F U L F U T U R E
E N V I S I O N I N G
Q U A L I T Y
F O C U S I N G O N A M E N T A L P I C T U R E
O F O U R S U C C E S S F U L F U T U R E
92
Navitas Limited Annual Report 2016
Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited. Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Brookfield Place, Tower 2 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au Dear Directors Navitas Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Navitas Limited. As lead audit partner for the audit of the financial statements of Navitas Limited for the financial year ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU A T Richards Partner Chartered Accountants The Board of Directors Navitas Limited Level 8, Brookfield Place 125 St Georges Terrace Perth WA 6000 1 August 2016 Navitas Limited Annual Report 2016 93
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Navitas Limited, I state that:
1. In the opinion of the Directors:
(a) the financial statements and notes are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position as at 30 June 2016 and the performance for the year ended on that date of the
consolidated entity; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 1.1 to the financial
statements; and
(c) there are reasonable grounds to believe that the Company will be able to pays its debts as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with sections 295A of the
Corporations Act 2001 for the financial year ended 30 June 2016.
3. In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in note 6.1.1 will, as a group, be able to meet any obligations or liabilities to which they are or may become subject, by virtue
of the Deed of Cross Guarantee.
On behalf of the Board
R JONES
Group Chief Executive Officer and Managing Director
Perth, Western Australia, 1 August 2016
Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited. Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Brookfield Place, Tower 2 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au Dear Directors Navitas Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Navitas Limited. As lead audit partner for the audit of the financial statements of Navitas Limited for the financial year ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU A T Richards Partner Chartered Accountants The Board of Directors Navitas Limited Level 8, Brookfield Place 125 St Georges Terrace Perth WA 6000 1 August 2016
94
Navitas Limited Annual Report 2016
Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Independent Auditor’s Report to the members of Navitas Limited Report on the Financial Report We have audited the accompanying financial report of Navitas Limited, which comprises the statement of financial position as at 30 June 2016, the statement of profit or loss and other comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity, comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 24 to 58 and 80. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the consolidated financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the company’s preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Brookfield Place, Tower 2 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au Navitas Limited Annual Report 2016 95
Auditor’s Independence Declaration In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Navitas Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of Navitas Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included on pages 66 to 78 of the directors’ report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion the Remuneration Report of Navitas Limited for the year ended 30 June 2016, complies with section 300A of the Corporations Act 2001. DELOITTE TOUCHE TOHMATSU A T Richards Partner Chartered Accountants Perth, 1 August 2016 96
Navitas Limited Annual Report 2016
Additional information required by ASX and
not shown elsewhere in this annual report is
as follows. The information is current as at 29
August 2016.
Substantial Shareholders
The number of Shares held by the substantial
Shareholders, as disclosed in substantial
holding notices given to the Company, were:
Shareholder
Mr Rodney M Jones
Hyperion Asset
Management Limited
Schroder Investment
Management Australia
Limited
Fully Paid
Ordinary Shares
45,117,995
26,827,805
26,421,938
Dr Peter D Larsen
23,433,610
Voting Rights
The voting rights attached to the class of
Navitas fully paid ordinary Shares as set
out in rule 16.2 of Navitas’ constitution are
the right to attend and vote at meetings of
Navitas and on a show of hands to one vote
and on a poll to one vote for each Share held.
Distribution of Shareholders
and their holdings
Size of holding
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001–and over
Total
Number of
Shareholders
2,006
1,604
384
276
79
4,349
Number of holders of the class of Navitas
fully paid ordinary Shares was 4,349.
Number of shareholders holding less than
a marketable parcel of fully paid ordinary
Shares and their total value of Shares, based
on the market price on 29 August 2016 was
249 Shareholders holding a total of 2,628
Shares.
None of the ordinary Shares are subject to
voluntary escrow and there are no restricted
securities on issue.
The Company has a current on-market
buy-back for up to 7.5% of its Shares, which
commenced on 16 February 2016 and has an
unlimited duration.
There are no issues of securities approved
for the purpose of item 7, Section 611 of the
Corporations Act which have not yet been
completed.
Twenty Largest Shareholders
The twenty largest holders of Navitas fully paid ordinary Shares on the Company’s register as at 29 August 2016 were:
Rank Name
1
J P Morgan Nominees Australia Limited
Number of Shares
67,860,875
% of Issued
Capital
18.26
34,711,843
30,589,619
23,433,610
22,316,169
18,751,890
17,637,078
15,033,208
9,709,191
9,486,690
9,345,979
8,633,391
8,565,914
8,129,000
5,527,968
5,299,363
4,384,312
3,677,365
3,623,160
2,912,158
9.34
8.23
6.31
6.01
5.05
4.75
4.05
2.61
2.55
2.52
2.32
2.31
2.19
1.49
1.43
1.18
0.99
0.98
0.78
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Remjay Investments Pty Ltd
HSBC Custody Nominees (Australia) Limited
Landmark Holdings (WA) Pty Ltd
National Nominees Limited
Wonder Holdings Pty Ltd
Cambo Investments Pty Ltd
Citicorp Nominees Pty Limited
Coolah Holdings Pty Ltd
Hoperidge Enterprises Pty Ltd
BNP Paribas Noms Pty Ltd
Mr Maxwell Charles Schroder
RBC Investor Services Australia Nominees Pty Limited
Ms Julianne Hannaford
Lily Investments Pty Ltd
BNP Paribas Nominees Pty Ltd
Mrs Luniarty Kartosudiro
Citicorp Nominees Pty Limited
Argo Investments Limited
CS Fourth Nominees Pty Limited
ADDITIONAL INFORMATION
Navitas Limited Annual Report 2016 97
INVESTOR INFORMATION
Annual General Meeting
Change of address
Navitas publications
The Company’s annual report is the
main source of information for investors.
Shareholders who do not wish to receive
the annual report should advise the Share
registry. Navitas’ financial reports are also
available on the Navitas website (see below).
Navitas website
Information about Navitas and the Group is
available on the internet at navitas.com.
The Annual General Meeting of Navitas will
be held at:
Curtin University
Old Perth Boys School
139 St Georges Terrace
Perth WA 6000
on Wednesday 16 November 2015 at
9.00am (AWST).
Full details of the meeting are contained in
the notice of annual general meeting sent with
this annual report for those Shareholders who
elected to receive a hard copy annual report.
Shareholder enquiries
All enquiries should be directed to the
Company’s Share registry at:
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
Perth WA 600
T 1300 55 70 10
F +61 8 9323 2033
All written enquiries should include your
Holder Identification Number as it appears
in your holding statement along with your
current address.
It is important that you notify the Share
registry immediately in writing if there is any
change to your registered address.
Lost holding statements
Shareholders should notify the Share registry
immediately, in writing, so that a replacement
statement can be arranged.
Change of name
Shareholders who change their name should
notify the Share registry, in writing, and
attach a certified copy of a relevant marriage
certificate or deed poll.
Tax File Numbers (TFN)
Although it is not compulsory for each
Shareholder to provide a TFN or exemption
details, for those Shareholders who do not
provide the necessary details, the Company
will be obliged to deduct tax from any
unfranked portion of their dividends at the
top marginal rate. TFN application forms
can be obtained from the Share registry,
any Australia Post Office or the Australian
Taxation Office.
98
Navitas Limited Annual Report 2016
GLOSSARY
ACAP
ACBT
AMEP
AQTF
ASIC
ASX
Australian College of Applied Psychology
Australian College of Business and Technology Pvt Ltd
Adult Migrant English Program
Australian Quality Training Framework
Australian Securities and Investments Commission
ASX Limited
ASX Listing Rules
The official listing rules of the ASX
ATTC
BAC
BCUIC
Board
CELUSA
Constitution
Australian TESOL Training Centre
British Accreditation Council
Birmingham City University International College
The board of directors of Navitas
Centre for English Language at the University of South Australia
The constitution of the Company
Corporations Act
Corporations Act 2001 (Cth)
CRIC
CRICOS
Cambridge Ruskin International College Limited
Commonwealth Register of Institutions and Courses for Overseas Students
Curtin College
Colleges of Business and Technology Pty Ltd trading as Curtin College
Curtin Singapore or
Curtin Singapore Campus
Curtin University of Technology Singapore Campus
Curtin Sydney or CUS
Curtin University of Technology Sydney Campus
Deakin College
Melbourne Institute of Business and Technology Pty Ltd trading as Deakin College
DIBP
Directors
DoET
EBITDA
EduGlobal
ELICOS
EOL
EPS
Department of Immigration and Border Protection
Directors of Navitas
Department of Education and Training
Earnings before interest, taxation, depreciation, amortisation and goodwill impairment
EduGlobal China Limited
English Language Intensive Courses for Overseas Students
Employment Overseas Limited
Earnings per share
Navitas Limited Annual Report 2016 99
ESOS Act
EVA®
Eynesbury
FAU
FEE-HELP
FIC
Education Services for Overseas Students Act 2000 (Cth)
Economic Value Added®
Educational Enterprises Australia Pty Ltd trading as Eynesbury International
Navitas at Florida Atlantic University
A government loan scheme to help eligible non-Commonwealth supported (fee paying)
students pay their tuition fees
Fraser International College
Group or Navitas Group
Navitas and its subsidiary companies
Griffith College
Queensland Institute of Business & Technology Pty Ltd trading as Griffith College
Hawthorn-Melbourne
Hawthorn Learning Pty Ltd trading as Hawthorn-Melbourne
HIC
HSA
HSS
HTS
ICM
ICP
ICRGU
ICWS
KPI
LBIC
LLNP
LTM
LTUSC
MOOC
MQC
HIBT Limited trading as Hertfordshire International College
Health Skills Australia Pty Ltd
Humanitarian Settlement Services
Highly Trusted Sponsor
International College of Manitoba
International College Portsmouth Limited
International College Robert Gordon University
International College Wales Limited
Key Performance Indicator
London IBT Limited trading as LBIC
Language, Literacy and Numeracy Program
La Trobe Melbourne
La Trobe University Sydney Campus
Massive Open Online Courses
Macquarie City Campus
Navitas or Company
Navitas Limited ABN 69 109 613 309
Navitas at UNH
Navitas at the University of New Hampshire
NRI
NCPS
NPAT
NQF
pcp
PDIC
Navitas Resources Institute
Navitas College of Public Safety Pty Ltd
Net profit after tax
National Qualifications Framework
prior comparative period
Plymouth Devon International College Limited
100 Navitas Limited Annual Report 2016
GLOSSARY
(CONTINUED)
PEP
PIBT
PIBT IEC
PY
QAA
RTO
SAE
SEE
Shareholder
Shares
SIBT
SOL
SPP
Professional and English Programs
Perth Institute of Business and Technology Pty Ltd
PIBT International English Centre
Professional Year
Quality Assurance Agency for higher education
Registered training organisation
SAE Institute
Skills for Education and Employment
A holder of a Share
Fully paid ordinary shares in the capital of the Company
Sydney Institute of Business and Technology Pty Ltd
Study Overseas Limited
Special Preparatory Program
StudyLink
Learning Information Systems Pty Ltd trading as StudyLink
TEQSA
TESOL
TVP
UCC
UCIC
UMass Boston
UMass Dartmouth
UMass Lowell
UNIC
UKBA
UPD
VET
WACC
WKU
WSUIC
Tertiary Education Quality and Standards Agency
Teachers of English to Speakers of Other Languages
Target variable pay
University of Canberra College
UC International College
Navitas at University of Massachusetts Boston
Navitas at University of Massachusetts Dartmouth
Navitas at University of Massachusetts Lowell
University of Northampton International College
UK Border Agency
University Partnerships Division
Vocational education and training
Weighted average cost of capital
Navitas at Western Kentucky University
Western Sydney University International College
Navitas Limited Annual Report 2016 101
102 Navitas Limited Annual Report 2016
CORPORATE INFORMATION
Directors
Executive Director
Mr Rod Jones
Non-Executive Directors
Mr Harvey Collins
Mr Tony Cipa
Ms Diana Eilert
Ms Tracey Horton
Mr James King
Ms Lisa Paul
Company Secretary
Mr Hugh Hangchi
Mr Matthew Rumpus (Assistant Company Secretary)
Registered Office
Navitas Limited
Level 8, Brookfield Place
125 St Georges Terrace
Perth WA 6000
Share Registrar
Computershare Investor Services Pty Limited
Level 2, 45 St Georges Terrace
Perth WA 6000
Auditor
Deloitte Touche Tohmatsu
Brookfield Place, Tower 2
123 St Georges Terrace
Perth WA 6000
Internet address
navitas.com
Navitas Limited Annual Report 2016 103
NAVITAS LIMITED
Level 8, Brookfield Place
125 St Georges Terrace
Perth WA 6000
T +61 (8) 9314 9600
F +61 (8) 9314 9699
E info@navitas.com
navitas.com
ABN 69 109 613 309
NAVC160324-1300 0916_AW