T R A N S F O R M I N G L I V E S
T H R O U G H E D U C A T I O N
N A V I T A S L I M I T E D
A N N U A L R E P O R T 2 0 1 7
TRANSFORMING
LIVES THROUGH
EDUCATION
Navitas has helped generations of learners
transform their lives through education. For
over 40 years, hundreds of thousands of
learners from around the world have
graduated from Navitas colleges, having
experienced a teaching and learning
environment that supports them to harness
their talents and achieve their dreams.
Navitas’ success is underpinned by its
unparalleled international network, a
peerless commitment to student
experiences and outcomes, a track record
of working in partnership with universities
and industry and a passion for discovering
new technologies and models of teaching
and learning that will improve education
now and into the future.
From pre-university and pathway programs
to university, to English language and
vocational training and undergraduate and
postgraduate degrees, Navitas reaches
aspirational learners at more than 120
colleges and campuses across its global
network each year, powered by a diverse
group of talented employees.
Navitas is a proud Australian company that
pioneered an innovative university
partnership model of education in Perth in
1994. Its entities have delivered education
programs across the country since 1976.
Navitas is listed on the Australian Securities
Exchange (ASX:NVT) and is part of the S&P/
ASX 200 Index.
Navitas Limited Annual Report 2017 III
STRATEGY
AND VALUES
VISION
MISSION
To be one of the
most trusted learning
organisations in the world.
Navitas is passionate about
creating opportunities through
lifelong learning, and being a
global leader in delivering
better learning solutions.
Drive
to achieve and
advance together.
Adventurous
in mind and spirit.
Conviction in our
purpose and potential.
Genuine in the
way we behave
and deliver.
Rigour to enhance our
professional reputation
and credibility.
Respect by
celebrating, valuing
and caring for people
and the environment.
IV
Navitas Limited Annual Report 2017
TRANSFORMING
LIVES THROUGH
EDUCATION
ANNUAL
REPORT 2017
CONTENTS
Navitas Limited Annual Report 2017 001
Operating and Financial Review 002
Navitas’ Global Footprint – .
Colleges, Campuses and Offices 004
Highlights and Achievements 006
Chairman and Group CEO Report 008
About Navitas 010
Review of Operations 012
About our Businesses 017
Corporate Responsibility 026
Corporate Governance 028
Navitas Leadership Team 030
Directors’ Report 034
Remuneration Report 040
Financial Statements and Notes 056
Consolidated Statement of Profit or Loss .
and Other Comprehensive Income 058
Consolidated Statement of Financial Position 059
Consolidated Statement of Cash Flows 060
Consolidated Statement of Changes in Equity 061
Notes to the Financial Statements 062
Directors’ Declaration 098
Independent Auditor’s Report 099
Additional Information 104
Investor Information 105
Glossary 106
Corporate Information 108
002 Navitas Limited Annual Report 2017
OPERATING
AND FINANCIAL
REVIEW
Navitas Limited Annual Report 2017 003
004 Navitas Limited Annual Report 2017
North America
Atlanta, Boca Raton, Boston,
Chicago, Dartmouth, Durham,
Emeryville, Los Angeles, Lowell,
Miami, Moscow, Nashville, New
York, Petersburg, San Francisco,
San Jose, Vancouver, Winnipeg
Mexico
Mexico City
South
America
Bogota,
Curacao
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.
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 2017 005
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,
Leipzig, Madrid, Milan, Munich, Paris, Stockholm, Stuttgart,
Vienna, Zurich
Sri Lanka
Colombo
Middle East
Amman, Dubai,
Jeddah
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
006 Navitas Limited Annual Report 2017
HIGHLIGHTS AND ACHIEVEMENTS
QUALITY
EFFICIENCY
GROWTH
Continued delivery of strong
student experience and
academic outcomes
170 basis point increase in
Careers and Industry
EBITDA margin
New agreements with
University of Idaho and
Richard Bland College
signed in the US
Average University Pass
rates 82%, Retention 87%,
Progression 94%
Creation of the Careers
and Industry Division
5% enrolment growth for
University Partnerships
5 University Partnership
contracts renewed
Operations streamlined
and shared service
implementation progressed
Navitas Ventures
launched
Navitas Group Revenue $955.2m
Navitas Group EBITDA $155.0m
Navitas Group NPAT $80.3m
1200
1000
800
600
200
100
1010.7
164.6
80
74.6
980.3
955.2
150
163.1
155.0
90.1
80.3
71.8
878.2
731.7
144.9
130.0
FY13
FY14
FY15
FY16 FY17
100
FY13
FY14
FY15
FY16 FY17
60
40
51.6
FY13
FY14
FY15
FY16 FY17
Navitas Limited Annual Report 2017 007
CORPORATE RESPONSIBILITY
Non-Executive
Director Diversity
Management Diversity
Staff Diversity
43%
57%
39%
61%
63%
37%
$ 5 60,000
185
Scholarships Awarded
worth
Navitas Education
Trust Donations
$1.8m
467
Hours Volunteered
5 Year Financial Summary
Revenue
EBITDA*
Profit attributable to
members of Navitas
Basic earnings per Share (cents)
Interim dividend per Share (cents)
(fully franked)
Final dividend per Share (cents)
2017
$000s
2016
$000s
2015
$000s
2014
$000s
2013
$000s
% change
17/16
955,195
1,010,651
980,341
878,219
731,734
155,048
164,581
163,107
144,929
130,002
(5)
(6)
80,337
90,078
71,810
51,584
74,575
22.1
9.4
10.1
24.0
9.6
9.9
19.1
9.4
10.1
13.7
9.4
10.1
19.9
9.3
10.2
EVA® created
49,545
60,286
62,861
51,779
46,100
Operating cash flows
101,534
125,810
141,834
140,939
126,819
Total equity
155,738
209,799
206,667
211,709
235,747
Return on capital employed
18.2%
21.6%
22.8%
19.9%
19.0%
* EBITDA = Earnings before impairment, taxes, depreciation, amortisation and non-operating gains or losses. EBITDA excludes the share of results of equity accounted investments in joint ventures.
008 Navitas Limited Annual Report 2017
CHAIRMAN AND
GROUP CEO REPORT
Dear Shareholder,
The 2017 financial year (FY17) was a period
of transformation for the business. We
simplified and streamlined operations,
revised our long-term strategy, and continued
to invest in the Group’s future growth.
Our commitment to the Group’s vision and
purpose remains steadfast. The resilience of
the Group’s FY17 earnings during a period
of significant market and business change is
directly related to this commitment.
Quality outcomes continue
to be delivered
Navitas’ academic outcomes can be seen in
the strong pass, retention and progression-
to-partner university rates. Net Promoter
Scores and other student satisfaction
surveys completed across the Group
including the Australian Quality Indicators for
Learning and Teaching surveys confirm the
Group’s quality delivery.
We were delighted that the Group’s ACAP
won the right to self-accredit. In addition,
SAE Australia, ACAP and HSA were all
approved to access the new VET Student
Loan system by the Australian Government
from FY18.
Efficiency initiatives underpin
improved margins
Significant work was completed to simplify
the business and improve efficiency. Global
shared service centres for Finance and HR
were created. Our University Partnerships
operating model was standardised to focus
on delivering better outcomes for students
and partners. In addition, a global Learning
and Teaching team was created to drive
innovation in delivery and best practice
across the Group.
The Careers and Industry Division was
created, merging the former SAE and
Professional and English Programs Divisions.
This new Division delivers education and
training to industry facing sectors, and has
generated cost efficiencies through the
pooling of resources such as marketing,
compliance and general management.
Having reviewed the performance of all
business units in FY17, we also closed a small
number of sub-optimal operations.
Growth achieved across
operational metrics
The University Partnerships Division grew
enrolments by 5% over FY17 and increased
fees by 2.5% on average. New partnership
contracts were signed with the University
of Idaho and the Richard Bland College
of William and Mary in the US, and five
existing partner contracts were successfully
renewed. Edith Cowan College also
converted to a joint venture to expand the
strategic opportunity for the college with our
partner. Finally, the Macquarie University and
Curtin Sydney contracts concluded as both
colleges finished teaching to students and
closed in FY17.
The Careers and Industry Division opened a
new SAE campus in Hannover, and entered
the attractive Canadian market through
the acquisition of a college in Vancouver.
Several SAE campuses were refurbished and
Navitas Limited Annual Report 2017 009
relocated, including Sydney and Berlin, to
continue to drive improved student outcomes
and enrolments.
Lastly, Navitas Ventures was launched to
provide a platform to extend into the next
generation of education focused initiatives
for growth.
A resilient result given market
conditions
Solid growth in student volumes across
most operations reduced the impact of
the closure of two Australian University
Partnerships colleges.
The closures, together with the conversion
of a college to a joint venture and significant
adverse foreign exchange translation
movements in the year, reduced Group
revenue by 5% to $955.2m. However,
improved operating leverage and increased
efficiencies offset the lower revenue, with
pro-forma EBITDA2 remaining in line with
FY16 at $161.0m.
The Careers and Industry Division was
also awarded fewer contract regions via
the retender process for the Adult Migrant
English Program which will reduce the
Division’s performance in FY18.
Updated strategy to drive
long-term growth
A strategic review in the second half of
FY17 confirmed continued strong growth in
demand for both international and tertiary
education across many of Navitas’ core
markets. An evolving sector will provide
extensive growth opportunities for a nimble,
well-funded and high-quality education
provider like Navitas. Further detail on the
updated strategy and progress is outlined in
this Annual Report.
Capital management initiatives
Navitas has delivered a fully franked FY17
dividend of 19.5 cents per share. The
Dividend Reinvestment Plan will continue.
In addition, Navitas continued its share
buy-back program. To date approximately
70% of the buy-back has been completed,
and the Company will continue to purchase
shares when appropriate, with a focus on
value accretion.
Good corporate governance
An overview of our governance and risk
management processes is available on page
28 and the full version of our corporate
governance statement is at www.navitas.
com/organisation/investors. We encourage
shareholders to read it in full.
Navitas’ relentless focus on quality outcomes
for students and partners has delivered a
high ratio of partnership contract extensions
over the Company’s 23 year history, with five
more renewals occurring in FY17.
Succession planning is also critical to the
ongoing success of Navitas and the Board
has continued to focus on Director and
senior executive capability and renewal
during FY17. This has included a change of
Chairman of the Board, and the appointment
of David Robb as a Non-Executive Director.
Succession planning for key roles remains a
priority for the Board.
Thank you for your
continued support
Navitas has done much to strengthen
its platform for long term growth
throughout FY17.
The Company’s global operating structures
are transforming to provide the best platform
to execute our strategy and deliver on growth
opportunities. The benefits can already be
seen in the continued student growth and
improved EBITDA margins for the Group. In
addition, we are focused on pursuing a wide
array of new opportunities to create value for
students, partners and shareholders.
We would like to thank the Board and the
entire Navitas team for their contribution
to the outcomes achieved in FY17 and their
willingness to embrace the changes needed
for a successful future. We would also like to
thank all our shareholders for their continued
support and look forward to delivering
continued growth in shareholder returns.
TRACEY HORTON AO
Chairman
ROD JONES
Group Chief Executive Officer
2 Pro-forma EBITDA includes share of EBITDA from joint ventures and excludes foreign currency translation movements – see page 12
010 Navitas Limited Annual Report 2017
ABOUT NAVITAS
Vision and purpose
Navitas’ vision is to be universally recognised
as one of the most trusted learning
organisations, and its purpose is to transform
lives by increasing student access to quality
tertiary education.
PURPOSE
Transform lives by increasing student access to quality tertiary education
CONVICTION DRIVE ADVENTUROUS RIGOUR GENUINE RESPECT
VISION
To be universally recognised as one of the world's most trusted learning organisations
UNIVERSITY PARTNERSHIP
(UP) BUSINESSES
CAREERS AND INDUSTRY
(C&I) BUSINESSES
NAVITAS
VENTURES
The preferred transformation partner
to universities around the world
Australasia | North America | Europe
Providing students with a quality, valued
education in segments with strong
employment prospects
Scaling ideas and growing teams
that unleash human potential and
transform the way the world learns
Creative | Government Programs
| Human Services | Health
Incubation | Investment | Partnerships
MEASURES OF SUCCESS
WORLD CLASS QUALITY
LEADING EFFICIENCY
SUSTAINABLE GROWTH
Partner NPS | Contract renewal | Student
progression | Employee engagement |
Senior retention
EBITDA Margin
Student commencements | EFTSU
| New partners | EBITDA | EVA®
Product and
information
distribution
Enquiry and offer
management
Timetabling
and registration
Study and learning
Completion
and graduation
sts of servic e s , $
o
C
2 5 1 . 2 m
Wealth cre
a
t
e
d
,
$
7
0
4
.
0
m
Group
revenue
$955.2m
How we create value
Navitas is an Australian headquartered,
global education company operating in 31
countries. Guided by its vision, purpose and
values, Navitas creates value by providing
high quality outcomes and experiences to our
students through their learning journey:
This commitment to high quality academic
outcomes and student experience covers
more than 120 education and training
operations in the post-secondary education
sector. Navitas also plays a vital economic
role in its communities. In FY17 wealth
generated by Navitas was distributed
as follows:
7%
7%
31%
Wealth
created
$704.0m
10%
22%
23%
Academic staff
University partners
Dividends
Reinvested
Non academic employees
Tax
Navitas Limited Annual Report 2017 011
Navitas operates across three main Divisions, supported by a shared corporate function:
•
University Partnerships: provides
pre-university, managed campus and
university pathway programs that
increase students’ access to higher
education and prepares them for
future success;
• Careers and Industry (formed in FY17
by the merger of the former SAE and
Professional and English Programs
Divisions): delivers vocational and higher
education programs in the creative,
government services, human services and
health sectors; and
Strategy
• Navitas Ventures: incubates, invests
and partners in emerging education
innovation and technology to support the
development of newly evolving education
models and initiatives.
In FY17 Navitas reviewed its strategic direction, examining the Company’s strategic position, identifying the key strategic areas of focus, and
defining new strategic goals to target.
Part One
Where are we now?
Part Two
Where do we want to be?
Part Three
How do we get there?
Confirming our strategic position, core
capabilities and conducting a diagnostic
of our markets and portfolio to evaluate
our strengths, weaknesses,
opportunities and threats.
Developing a clear direction and
prioritising a handful of key focus
areas that leverage our strengths and
reposition Navitas with key opportunities
we can pursue and measure.
Planning, resourcing and executing the
plan to get from where we are today
to where we want to be. Disciplined
execution of our strategy following
specific measurable KPIs.
The process clarified three distinct strategic
phases for Navitas over the coming years:
• Simplification phase (FY16 - FY17) - build
strong foundations by developing critical
capabilities, simplifying the business, and
improving relationships with students
and partners;
• Expansion phase (FY18 +) - leverage
a lean and agile core to expand into
strategic areas and explore new growth
opportunities; and
• Endurance phase (FY20+) - using these
new growth areas to access future
opportunities, and build new capabilities
that will differentiate and future proof
the business.
The Group intends to deliver the following set
of Key Strategic Goals by 2020, under the
three pillars of quality, efficiency and growth.
Progress to date includes:
The strategic plan incorporates the following vision and goals:
Division
Vision
Goals
University
Partnerships
Careers and
Industry
Navitas
Ventures
To be the preferred
transformation
partner to
universities around
the world
Provide students
with a quality,
valued education
in segments with
strong employment
prospects
Scale ideas and
invest in new
education models
and technology
• Extend and enhance University partnerships
contracts, services and student outcomes
• Develop new products
• Grow, retain and support partners
• Refocus the Division into industry aligned sectors
Increase performance of the core including
•
academic outcomes
• Develop future business opportunities
• Appoint key resources and establish deal pipeline
• Make investments that provide a 15% minimum IRR
to Navitas
• Gain access to new capabilities that build, extend
and hedge our core business
Metric
QUALITY
EFFICIENCY
GROWTH
FY17
1. Pass rates of 82%
2. Retention rates of 87%
2020 Target
1. Pass rates to 84%1
2. Retention rates to 90%1
1. Group EBITDA Margin flat at 16.3%
2. SAE EBITDA Margin up 80bps to 14.9%
3. KPI commences in FY18
1. 18% Group EBITDA Margin
2. 20% SAE EBITDA Margin
3. Annual capex under $20m
1. Group revenue decreased by 5%
2. 5% full time enrolment CAGR in FY17
3. KPI Commences in FY18
1. 5%2 revenue CAGR
2. 5% full time enrolment CAGR
3. 5 new university partnerships1
1 University Partnerships Division only
2 Based on constant currency and CAGR calculated assuming AMEP revenue reduction excluded from FY17 to FY20. This reduces to 3% CAGR against FY17 Group revenue if AMEP revenue
is included.
012 Navitas Limited Annual Report 2017
REVIEW OF OPERATIONS
FY17 Group Financial performance
The Group’s summary results for FY17 were:
Year ended 30 June
2017
2016
% growth (actual FX)
% growth (constant FX)
(3)
(3)
(1)
-
-
-
-
955.2
155.0
161.0
136.4
80.3
22.1
19.5
1,010.7
164.6
163.2
133.1
90.1
24.0
19.5
Revenue was distributed geographically as below:
4%
6%
8%
$955.2m
9%
10%
63%
(5)
(6)
(1)
3
(11)
(8)
-
Australia
US
Canada
UK
EU
ROW
Total revenue ($m)
Reported EBITDA ($m)
Pro-forma EBITDA ($m)1
EBIT ($m)
Reported NPAT ($m)
EPS (cents)
Full year dividend (cents fully franked)
1 Pro-forma EBITDA is defined in the table below
Total revenue decreased by
5% to $955.2m reflecting:
• Solid enrolment growth in
Australian and Canadian University
Partnerships colleges;
• Growth in AMEP clients following
an increased intake of humanitarian
entrants from Syria in Australia;
• The final wind-down and closure of the
Macquarie and Curtin Sydney colleges;
•
The continued restrictive policy
environment in the UK;
• The de-recognition of more than $17.0m
of revenue following the conversion
of Edith Cowan College to a joint
venture; and
• The unfavourable $27.6m impact from
foreign currency translation movements.
Reported EBITDA decreased 6% to $155.0m driven primarily by the decline in revenue but partially offset by lower costs from improved operating
efficiency. On a constant currency basis, the decline in EBITDA was only 1%.
Reported NPAT decreased by 11% to $80.3m in line with the decrease in reported EBITDA. While NPAT benefited by a net $14.3m non-recurring gain
principally from the conversion of Edith Cowan College to a joint venture, this was more than offset by the revenue reduction, an increase in effective
tax rate to 38.2% following a partial de-recognition of US carry forward tax losses (see note 3.4.3) and higher depreciation and net interest.
Divisional EBITDA results were as follows:
Year ended 30 June
$m
University Partnerships1
Professional and English Programs (PEP)
SAE
Careers & Industry
Divisional EBITDA
Corporate costs
Reported Group EBITDA
Share of EBITDA from joint ventures
Foreign exchange movements
Pro-forma EBITDA2
2017
20161
% growth
(actual FX)
% growth
(constant FX)
2017 EBITDA
margin (%)
131.2
146.9
(11)
31.1
29.9
61.0
192.2
(37.2)
155.0
1.4
4.6
25.4
28.5
53.9
200.8
(36.2)
164.6
(1.4)
-
161.0
163.2
22
5
13
(4)
3
(6)
-
-
(1)
(8)
22
5
13
(2)
3
(3)
-
-
(1)
22.9
17.8
14.9
16.3
-
-
16.3
-
-
16.3
Note 1 $64.3m of revenue and $9.7m of EBITDA was reclassified from Professional and English Programs to University Partnerships in FY16 following the restructuring of ELICOS colleges
to the Division. All comparative periods adjusted accordingly.
Note 2 Pro-forma EBITDA includes share of EBITDA from joint ventures and excludes foreign currency translation movements.
Financial controls and systems
All of Navitas’ major operations now utilise
Oracle which is integrated with a new
upgraded student management system. A
new shared financial service structure for
financial reporting will be completed by the
end of the 2017 calendar year.
Capex and depreciation
Capex for the year was $81.7m, primarily
due to $47.8m of costs associated with
refurbishing the Group’s new education
facility on Elizabeth Street in Sydney.
The majority of these costs were largely
refunded through a lease incentive provided
for the refurbishment. SAE also invested
in relocating or refurbishing campuses in
Berlin, Sydney and Emeryville to drive further
student growth.
Depreciation for the year was $32.3m,
a 4.9% increase on FY16. This reflected
increased capital expenditure in recent
years on new SAE campus fit-outs and the
continued implementation of the new student
management system.
Interest
Net interest expense of $5.8m was $1.8m
higher than FY16 reflecting the impact of the
share buy-back program and higher capital
expenditures on net debt during the year.
Tax
For FY17, Navitas’ global effective tax
rate increased to 38.2%, due to a partial
de-recognition of $8.9m of carry forward
tax losses in the US (see note 3.4.3). While
demand for education services in the US
remains strong recent restrictive immigration
practices have impacted on growth forecasts
for Navitas’ US operations. The effective
tax rate is 31.4% excluding this change in
carrying value.
Navitas’ global tax rate is impacted by a
number of considerations, including the
tax rates of the jurisdictions where Navitas
derives income and the entitlement to
tax concessions, such as research and
development deductions. These factors
substantially account for any difference
between Navitas’ global effective tax rate
and the Australian corporate income tax rate
of 30%.
Navitas’ approach to tax strategy is to
ensure robust tax governance across the
countries in which Navitas operates, to
meet compliance obligations with local tax
authorities, and to ensure tax contributions
align with the broader objective of being an
outstanding corporate citizen. In conducting
Navitas’ operations (both in Australia and
offshore), Navitas pays tax where the
underlying economic activity takes place.
Navitas supports initiatives by revenue
authorities and large corporations to provide
additional tax transparency to stakeholders
and the community. To this end Navitas
has willingly adopted the Australian Board
of Taxation’s Voluntary Tax Transparency
Code and other comparable initiatives being
adopted internationally.
A UK subsidiary of Navitas has been in
dispute with HM Revenue & Customs (HMRC)
in the UK as to whether the subsidiary
provides exempt education for the purposes
of UK VAT. Over the course of the dispute
Navitas’ UK subsidiary has prepaid all VAT
claimed by HMRC pending the result of the
court process. The UK subsidiary recently
presented its case to the Court of Appeal
in the UK, however, on 28 July 2017, the UK
subsidiary was formally advised that the
Court of Appeal had ruled in favour of HMRC.
Based on discussions with Queen's Counsel
the UK subsidiary have sought leave to
appeal this decision.
Balance sheet
Net debt at 30 June 2017 was $186.0m (30
June 2016: $56.2m) reflecting:
• Lower operating cash flows, mainly due to
closed colleges;
• The investment of cash from the Group
following the conversion of Edith Cowan
College to a joint venture;
•
Increased capital expenditure net of lease
incentives; and
• $69.8m spend on the share buy-
back program.
Shareholders’ funds at 30 June 2017 were
$155.7m (30 June 2016: $209.8m). Deferred
revenue at 30 June 2017 was $262.1m (30
June 2016: $272.7m). Deferred revenue has
been impacted by the closure of University
Partnerships colleges and the conversion of
Edith Cowan College into a joint venture.
Cash flows
Operating cash flows of $101.5m were down
on the prior year (FY16: $125.8m) principally
due to the reversal of deferred revenue of
closing colleges, the conversion of Edith
Cowan College into a joint venture, and the
settlement of make good obligations for
exited leased premises. These were partially
offset by lease incentive contributions and
lower income tax paid.
Shareholder Value and EVA®
Navitas utilises the economic value added
(EVA®) framework to assess shareholder
value with EVA® being a measure of returns
above or below the Group’s weighted average
cost of capital for funds employed by the
business. Targets for EVA® growth are set
every three years and are currently being set
for the FY18 to FY20 period.
Navitas Limited Annual Report 2017 013
EVA® for FY17 was $49.5m which represents
a $10.7m decrease in EVA® compared to
FY16. Further details about the calculation of
EVA® can be found on page 43 of this report.
Dividend
The Directors have declared a fully franked
final dividend of 10.1 cents per share
(FY16: 9.9 cents). This takes the full year,
fully franked, dividend to 19.5 cents (FY16:
19.5 cents) in line with the Company’s
dividend policy.
The dividend will be paid on 15 September
2017 with the record date being 1 September
2017. 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 4 September 2017.
Risks
Navitas deals with a variety of business risks,
which it actively assesses and manages
as part of its risk management framework.
These disclosures relate to economic and
social sustainability risks (as defined by
the Corporate Governance Principles and
Recommendations (3rd Edition) published
by the ASX Corporate Governance Council).
The Company does not consider it has any
material environmental risks.
Navitas’ material business risks and the
way they are managed are described below.
This is not a comprehensive list of the risks
involved or the mitigating actions that have
been adopted by the Company.
Government Policy and Regulation
Navitas operates in the higher education
sector which is subject to extensive laws
and regulations. There are a number of
government policies and regulations that, if
changed, may have a material adverse impact
on the financial and operational performance
of Navitas. This past year has seen several
government and policy changes in the
countries within which Navitas operates.
Navitas anticipates more change in the year
ahead as these governments increase their
focus on improving the economic impact
of education and skills. The trend towards
stronger border security will also be a factor.
Navitas’ presence in North America, Europe
and Australasia creates an opportunity to
respond to less welcoming visa environments
and channel students into colleges and
courses in countries with more certain or
favorable government immigration settings.
Navitas monitors legislative and regulatory
developments and engages appropriately
with legislative and regulatory bodies to
manage this risk. Navitas also engages with
industry bodies and non-governmental
organisations globally to promote the
advancement of international education.
Navitas uses a range of formal and informal
processes, both internal and external, to
monitor, assess, improve and add value to
partnerships and relationships. Metrics to
measure relationships with key stakeholders
and student outcomes are gathered at
regular intervals.
Contract Renewal
The core of Navitas operations is based on
contractual relationships with University
Partners, Commonwealth and State
Governments and Industry Partners. Each
contract has a fixed term requiring renewal
or extension of terms, conditions, the scope
and tenure period. From time to time some
contracts are not retained, either in full or to
the extent they were previously. This was the
case with the AMEP and SEE contracts where
the new contract allocated fewer hours
for content delivery and awarded Navitas
fewer contract regions. This will result in a
reduction in Navitas revenue generated from
this contract. Navitas takes a disciplined
approach to contract renewal. Accountability
for ongoing partner relationships is assigned
to Company executives and regular updates
are provided to the Navitas Board.
014 Navitas Limited Annual Report 2017
REVIEW OF OPERATIONS (CONTINUED)
Licences and Accreditation
Market Dependency
There are varying degrees of political,
judicial and environmental stability in source
countries where our prospective students
originate and also the destination countries
in which Navitas operates from.
If a major political or natural event occurred,
it may limit or restrict for a short to medium
period the freedom of movement for students
from source countries or into destination
countries. One or more of these events could
have a negative effect on our ability to source
students into our educational programs,
as well as the Company’s overall student
enrolments and financial results. Navitas
utilises a broad network of source country
offices and agents to ensure a reliable
flow of students across a wide geography
is maintained.
Partner Relationships
Navitas works with a variety of partners
including industry bodies, regulators,
service providers, governments and partner
universities for core business operations. All
parties maximise the benefits when there is
a strong relationship. There are a number of
events which could affect the relationship,
including: strategic misalignment; student,
business and compliance performance; and
commercial differences.
Key executives of the Navitas Group and
business managers are accountable for the
health and management of relationships
within their portfolios. Navitas has
maintained a consistent management team
across its University Partnerships Division
and pathway colleges, with many College
Director/Principals serving long tenures in
the role. The Careers and Industry Division
aligns its operations with industry bodies,
regulators and governments. Globally
operations are supported by a centralised
Corporate Affairs team.
If Navitas is unable to secure or retain
licences or accreditations for the operation
of its courses, colleges or campuses (where
required) in the future, or any of its existing
licences or accreditations are adversely
amended or revoked, this may adversely
impact Navitas’ ability to operate its
businesses. This risk is mitigated by Navitas’
comprehensive quality and compliance
framework which seeks to ensure that
operations are conducted to the standards
required to retain licences and accreditation.
Impact of Competition and Innovation
Navitas’ core business of running pathway
programs is underpinned by a nurturing face-
to-face learning environment for international
students which provides a range of benefits
to integrate students into a foreign country
and a university education. However, like
many sectors, the higher education sector
is subject to increased competition and
disruption, requiring a need to innovate to
remain a market leader. Navitas must always
innovate to stay relevant to prospective
and current students and its university and
business partners.
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 insights
and intelligence on higher education
trends and growth opportunities. Navitas
Ventures also provides a means for Navitas
to invest in new income streams, including
innovative EduTech.
Protection of Information
Navitas collects, stores and processes
student and business partners’ information.
Navitas then has the ability to access and
transmit that information to and from its
students and business partners. In response
to the evolving cyber threats which all
organisations face nowadays, Navitas has an
ongoing, global program of works which is
designed to reduce the information risks to
our business, our students and our business
partners. We continually prioritise this
work, but in general, we implement security
controls across our people, our processes
and our technologies based on highest
potential impact.
Navitas Limited Annual Report 2017 015
016 Navitas Limited Annual Report 2017
Navitas Limited Annual Report 2017 017
ABOUT OUR BUSINESSES
UNIVERSITY PARTNERSHIPS DIVISION
Highlights
QUALITY
EFFICIENCY
GROWTH
Average Pass rates 82%
Retention 87%
Progression 94%
Implementation of optimal
college model enhances
efficiency and best practice
5% enrolment growth
and 2.5% average fee
growth in FY17
Continued delivery of strong
student experience and
academic outcomes
ELICOS colleges
integrated with University
Partnerships to improve
student outcomes
New agreements with
University of Idaho and
Richard Bland College
signed in the US
5 University Partnership
contracts renewed
Edith Cowan College
converted to joint venture
University Partnerships Revenue
$574.1m
University Partnerships EBITDA
$131.3m
University Partnerships EBITDA Margin
22.9%
700
600
500
400
635.4
628.2
150
146.9
147.8
127.3
131.3
560.6
574.1
120
111.9
474.9
FY13
FY14
FY15
FY16 FY17
90
FY13
FY14
FY15
FY16 FY17
24
23
22
21
23.6%
23.5%
23.1%
22.7%
22.9%
FY13
FY14
FY15
FY16 FY17
018 Navitas Limited Annual Report 2017
ABOUT OUR BUSINESSES: UNIVERSITY PARTNERSHIPS (CONTINUED)
University Partnerships overview
The University Partnerships Division provides
pre-university and university pathway
programs, to international and domestic
students enhancing their probability of
success in higher education. Pathway
programs are delivered across both
undergraduate and postgraduate levels.
The pathway program model provides
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.
On completion of the Navitas program
students are eligible for direct entry into
second and third year programs at partner
universities, or Masters level programs for
postgraduate students.
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.
Navitas currently operates 34 University
Partnerships’ colleges across three main
regions. In addition, the Division now has
responsibility for eight English Language
colleges and the Professional Year Program,
which supports international students to find
employment after graduation in Australia.
Market conditions and share
The University Partnerships Division operates
in Australia, Canada, the US, UK, New
Zealand, Sri Lanka and Singapore. Regulation
and government policy can significantly
influence the Division’s operations and varies
across jurisdictions.
The Australian Government introduced the
Simplified Streamlined Visa Framework
(SSVF) on 1 July 2016, which reduced the
number of student visa categories and
l
e
v
e
L
y
t
i
s
r
e
v
i
n
U
y
t
i
s
r
e
v
i
n
U
-
e
r
P
Managed Campus
Third Year
Second Year
Diploma - Stage 2
Foundation - Stage 1
Year 12
or equivalent
Year 11
or equivalent
High School
Partner University
improved visa accessibility. Australia now has
a very competitive international student visa
regime that encourages genuine students
and provides opportunity for employment
after graduation. Canada also has a very
supportive international student visa regime.
The US and UK sectors remained challenging
during FY17. Demand is strong but
enrolments are lower following uncertainty
caused by the Brexit vote in the UK and a
new highly restrictive immigration policy in
the US.
Navitas has a leading market share in the
Australian and Canadian pathway sectors,
with a smaller market share in the UK and US.
• An average progression-to-partner
university rate of 94%.
A student satisfaction survey completed
in FY17 by over 6,000 students found that
97% of students were satisfied or better
with the quality of teaching at their Navitas
pathway college.
In addition, the Division’s English Language
schools achieved a Net Promoter Score of
+39 based on over 4,400 responses in FY17,
and Professional Year Programs achieved a
Net Promoter Score of +50.
Efficiency
Significant initiatives were completed to
standardise the operating structure of all
University Partnerships’ colleges across
Australasia and North America. English
language colleges (ELICOS) were also
relocated to the Division to better align
core competencies.
Growth
Overall enrolments were up 5% in FY17
compared with FY16 due to continued strong
demand for quality education opportunities
by international students. The average price
growth across the colleges was 2.5% in FY17.
Despite solid underlying growth in most
regions, University Partnerships revenue
declined by 10% to $574.1m following the
final wind-down and closure of the Macquarie
and Curtin Sydney colleges, the continuation
of the restrictive UK international student
visa regime and the adverse impact of foreign
currency translation movements on some
overseas operations.
Business development to renew existing
partnership contracts or establish new
partnership agreements continues to be
a major focus across all regions. New
agreements were signed with the University
of Idaho and the Richard Bland College
of William and Mary in the US. The latter
involves an innovative new approach by
Navitas to provide international student
recruitment and administration services to
support the College.
Contracts with our partners at Deakin
University, the University of Manitoba, the
University of Hertfordshire, the University
of South Australia and the University of
Adelaide were all renewed in the year. Edith
Cowan College, in conjunction with Edith
Cowan University, was also converted to
a joint venture to expand the strategic
opportunity to grow.
Location of University
Partnerships colleges
Quality
University Partnerships’ colleges continued
to achieve high quality outcomes:
• Average pass rates of 82%;
Australasia
• Average retention rates of 87%; and
9
15
34
10
Europe
North
America
Navitas Limited Annual Report 2017 019
Progress against strategy
In FY17 Navitas released its revised strategic direction and vision for the University Partnerships Division. Progress to date against that strategy is
outlined in the table below.
University Partnerships vision - To be the preferred transformation partner to universities around the world
Extend and enhance University
partnerships contracts, services
and student outcomes
FY17 progress
By 2020
9 High pass, retention and progression-
• Continue to improve/maintain high pass, retention and
to-university rates maintained
progression rates
9 SAIBT, Eynesbury, HIBT, ICM and Deakin
•
contracts renewed
9 Optimal College model completed in
Australia and North America
9 Sales and Marketing transformation
program underway
In FY18 renew all due contracts – Anglia Ruskin
University (Nov), Swansea University (Nov), Curtin
University (Curtin College - Dec, Singapore - Mar),
Brunel (Jan)
• Complete optimal college model in Europe in FY18
• Complete the implementation of Sales and Marketing
transformation initiatives including the rollout of an
improved student recruitment platform
•
Improve Division efficiency and margin
Develop new products
9 New programs in Engineering, Health
• Expand new programs and products to partners
Sciences and Sports Science
• Explore pathways-to-employment offering and work
9 English language programs and
integrated learning
Internships business now integrated
Grow, retain and support partners
9 Signed new agreements with the
University of Idaho and the Richard
Bland College of William and Mary
9 Strong business development pipeline
• Sign 5 new university partners by 2020
• Maintain strong business development pipeline
• Expand suite of pathway solutions
• Explore a variety of models to suit different needs of
university partners
9 Edith Cowan College converted to joint
• Develop and target transformation offerings
venture model
for partners
020 Navitas Limited Annual Report 2017
Navitas Limited Annual Report 2017 021
ABOUT OUR BUSINESSES
CAREERS AND INDUSTRY DIVISION
Highlights
QUALITY
EFFICIENCY
GROWTH
Above sector average Quality
Indicators for Learning and
Teaching survey results
EBITDA margin up by 170
basis points to 16.3%
2% revenue growth and
13% EBITDA growth
ACAP granted self-
accrediting status
Creation of the Careers
and Industry Division
New SAE campus in
Hannover and expansion
into Canada
All Australian vocational
businesses qualified for
VET Student Loan funding
from 1 July 17
Campus relocation for
growth in Sydney and Berlin
Careers and Industry Revenue
$375.1m
Careers and Industry EBITDA
$61.0m
Careers and Industry EBITDA Margin
16.3%
347.6
313.2
252.1
400
300
200
100
368.4
70
375.1
18
61.0
16
15.3%
16.3%
50
30
53.9
48.2
44.3
38.6
FY13
FY14
FY15
FY16 FY17
14
12
14.6%
14.1%
13.8%
FY13
FY14
FY15
FY16 FY17
FY13
FY14
FY15
FY16 FY17
FY13-FY16 results above restated to combine former SAE and Professional and English Programs division results.
022 Navitas Limited Annual Report 2017
ABOUT OUR BUSINESSES: CAREERS AND INDUSTRY (CONTINUED)
Careers and Industry overview
Created in January 2017 with the merger of
the former SAE and Professional and English
Programs Divisions, the Careers and Industry
Division delivers tertiary to post graduate
level programs across several sectors:
• Creative: delivers a range of
predominantly Higher Education
programs via the SAE chain of creative
media colleges across several major fields
of study: audio, film, animation, gaming,
design, and web. SAE is one of the
world’s largest creative media education
companies, with 51 campuses across
26 countries.
• Government services: delivers the
Australian Government’s AMEP and the
SEE program across Australia.
• Human Services: delivered by the
ACAP and the NCPS, courses include
diploma to higher education programs in
psychology, counselling, social work and
criminal justice.
•
Health: delivered by HSA including a
diploma in Nursing.
All colleges and campuses across the
Division are industry orientated with a
focus on the delivery of strong employment
outcomes and with curricula that are
fully owned by Navitas. Students are
predominantly domestic students.
Market conditions and share
The Careers and Industry Division operates
across multiple jurisdictions, including
the UK, US and Europe, though most of its
operations are in Australia.
While higher education policy in Australia
remained supportive, widespread reforms
to Commonwealth vocational education
funding were introduced in January 2017.
Known as VET Student Loans (VSL), it is likely
that these vocational education reforms will
continue to impact enrolments in Australian
based Careers and Industry businesses in the
medium term.
Ongoing reforms to national accrediting
bodies in the US have resulted in the need
for several US SAE colleges to change
accreditors thereby slowing the ongoing
approval process for new student programs
that are available for launch.
In March 2017, the Commonwealth
Department of Education and Training
announced that it had awarded Navitas with
a significantly reduced number of contract
regions to deliver the AMEP from 1 July
2017, following its tender process. It is now
anticipated that this reduction will result
in a decrease in EBITDA of $14.0m for the
Careers and Industry Division in FY18.
Creative
Brand: SAE
• Global SAE operations
• 51 campuses globally
• Licensed territories
Human Services
Brand: ACAP, NCPS
• Counselling
• Psychological
Services
• Social Work
• Criminal Justice
• Youth Work
• Community Services
SAE UK had its appeal rejected by the Court
of Appeal regarding its VAT exemption
status and is seeking leave to appeal this
decision. However, SAE’s UK colleges were
restructured to operate profitably without an
exemption ahead of the outcome.
Quality
A commitment to quality outcomes is
reflected in high Net Promoter Scores
and strong student experience survey
results compared to the wider higher
education sector.
ACAP and NCPS achieved above-average
results in the 2017 Australian Quality
Indicators for Learning and Teaching survey
in many areas including skills development
(+5%), teaching quality (+5%) and graduate
satisfaction (+6%).
SAE achieved higher than sector-average
scores in the same survey in the areas of
student support (+11%), skills development
(+4%) and teaching quality (+3%). Additionally
over 90% of students surveyed at SAE globally
were satisfied with both academic support
levels and the relevancy of teaching content
to a career in the industry.
Following the changes to vocational funding
in Australia, all Careers and Industry
businesses gained accreditation to access
the new VSL funding regime, meaning that
all Australian students can access federal
funding to support their studies from
1 July 2017.
Finally ACAP was reaccredited by TEQSA
as a Higher Education Provider for the
maximum seven years period and was also
awarded self-accrediting authority. This gives
ACAP the authority to self-accredit courses
through to Masters level across a range of
Government
Services
Brand: AMEP, SEE
• Language, Literacy and Numeracy
• Employment services
Health
Brand: HSA
• Nursing (Diploma)
programs, significantly reducing course
development timeframes.
Efficiency
The creation of the Careers and Industry
Division generated efficiencies that helped
contribute to an improved EBITDA margin
of 16.3%, 170 basis points higher than
FY16. An ongoing focus on cost control and
efficiency across all business divisions and
improved leverage in some Australian and
US campuses also supported the margin
improvement. Four sub-scale SAE campuses
were closed in FY17 following a detailed
portfolio review.
Growth
SAE started construction on a new campus
in Hannover, Germany, and relocated or
refurbished a number of campuses, including
Sydney and Berlin, to allow for greater
growth. SAE also acquired a small creative
media education business in Vancouver to
enter the growing Canadian creative media
education sector.
Careers and Industry revenue increased 2%
to $375.1m, largely due to a one-off increase
in humanitarian entrants into Australia’s Adult
Migrant English Program which the Division
manages in NSW. SAE revenues continued to
grow by 8% in Australia and 6% in the US but
these were offset by tougher conditions in its
European campuses and by adverse foreign
currency translation movements for overseas
operations. EBITDA grew by 13% to $61.0m
following improved cost control across SAE.
Navitas Limited Annual Report 2017 023
Progress against strategy
Careers and Industry vision - Providing students with a quality, valued education in segments with strong employment prospects
Refocus into industry aligned
vertical segments
9 Careers and Industry restructure now largely
• Finalise C&I operational restructure and deliver full
complete
integration benefits by FY18
FY17 progress
By 2020
9 Aligned sectors around Creative, Government
Services, Human Services and Health created
9 4 sub-scale SAE campuses exited
Increase performance of core –
including academic outcomes
9 Strong academic and student experience
• Keep improving academic and student
outcomes
experience outcomes
9 SAE US product expansion progressing – 15
• Gain approval for >20 new programs in the US
new programs approved for delivery
9 ACAP awarded self-accrediting status
9 SAE and ACAP receive VET Student
Loan accreditation
• Develop efficiencies across the Division
Develop future business
opportunities
9 Market research commenced to identify
appropriate new verticals
9 Screening commenced for quality entry
options (organic/inorganic)
9 Partner with Navitas Ventures to explore
borderless opportunities
• New vertical segments developed and expanded
• Further develop online capability
• Build or acquire high quality borderless education
organisations aligned to vertical segments
• Explore further SAE licensing opportunities
024 Navitas Limited Annual Report 2017
ABOUT OUR BUSINESSES
NAVITAS VENTURES
Overview
Navitas Ventures is a platform for Navitas to drive and scale ideas that will transform the way the world learns. Navitas will do this via incubation,
investment and partnerships.
INCUBATION
INVESTMENT
PARTNERSHIPS
Navitas Ventures develops
a thesis, tests the concept
and brings in like minded
talent to help execute
and scale.
Navitas Ventures recognises
a repeatable growth pattern
and compelling team and
makes a strategic investment
to accelerate growth.
Universities, Tertiary
Institutions and Industry
partner with Navitas
Ventures to develop new
models and initiatives.
Navitas Ventures’ strength lies in its ability to
harness expertise and resources from across
the global Group to support the development
or expansion of education innovation.
Navitas Ventures has a robust investment
approval process, with a small
dedicated team connected to the core
Navitas business.
Operational outcomes
Established in mid FY17, Navitas Ventures has:
• Mapped the education innovation and
technology landscape finding that over
5,000 companies represent $40.0b
of investment;
• Partnered with EduGrowth, an Australian
EdTech accelerator;
•
•
•
Invested in the Australian School
of Applied Management (ASAM),
a leading provider of unaccredited
management programs;
Invested in Paragon One, a US based
online college career centre;
Integrated and expanded Studylink, a
majority Navitas owned cloud based
student recruitment and admissions
management platform; and
•
Investments in FY17 totalled
approximately ~$2.5m
Progress against strategy
Navitas Ventures vision - Scale ideas and invest in new education models and technology
Develop model,
pipeline and
reputation in key
markets venture
model
Acquire high
potential
opportunities
FY17 progress
By 2020
9 Established governance and
investment platform
• Continue to improve
Ventures model
9 Developed linkages into key
• Widen investment pipeline
markets
9 Mapped the Edtech start-up
landscape
9 Investment pipeline built
9 Thought leadership commenced
and ongoing
• Continue to build
profile via thought
leadership opportunities
9 Invested in Australian School of
• Completion of
Applied Management
9 Invested in Paragon One and
expanded investment in Studylink
9 Progressed due diligence on various
opportunities including AI learning
tools and blockchain accreditation
investment opportunities
and value added
Incubate, nurture
and scale
9 Providing ecosystem and
management support to the
Australian School of Applied
Management and StudyLink to
expand their capability and markets
• Grow invested businesses
• Exit or acquire where
appropriate
• Pass learnings back to
the core
Navitas Limited Annual Report 2017 025
026 Navitas Limited Annual Report 2017
CORPORATE RESPONSIBILITY
Our People
Supporting our people and
being a good employer
Our Customers
Ensuring positive outcomes for
students, clients and partners
Navitas cares
We show respect by
celebrating, valuing and
caring for people,
our communities and
the environment.
Our Environment
Ensuring environmental
awareness and sustainability
Our Community
Contributing positively
to our communities
As at 30 June 2017, the proportion of men and women employed by the Navitas Group in
Australia is set out in the table below:
Position
Men
Women
4 (57%)
91 (61%)
545 (41%)
57 (38%)
177 (26%)
44 (49%)
3 (43%)
59 (39%)
773 (59%)
94 (62%)
515 (74%)
46 (51%)
Navitas’ Wellness, Health and Safety (WHS)
program continues the focus on protecting
and enhancing health and wellness for
everyone who works, learns or visits with
Navitas in FY17. Navitas has approved the
WHS Strategy 2017-2020, which will drive
WHS improvements through four strategic
focus areas;
• People, Capability and Culture;
• Keeping Staff and Students Safe;
• Workplace Injury & Illness Support
Programs; and
• Promoting Physical & Mental Wellness.
Non-Executive Directors
Senior Managers
Full time Permanent Employees
Full time Contract Employees
Part time Permanent Employees
Part time Contract Employees
The Diversity Policy is publicly available on
the Company's website: www.navitas.com/
corporate/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 FY17 Navitas’ Australian
operations reported:
Metric
FY17
FY16
Fatalities
Lost Time Injury
Frequency Rate (LTIFR)
- number of lost time
injuries per million
hours worked
Prosecutions or
Regulatory/Improvement
notices
0
0
0.95
2.27
0
0
Navitas has a reputation as a socially
responsible organisation. Importantly,
this reputation sits alongside the Group’s
commitment and track record of delivering
high quality academic outcomes.
Navitas’ corporate responsibility strategy
focuses on: 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 its shareholders.
Supporting our people and being
a good employer
Navitas was built on a desire to support
a diverse group of students to succeed
in their tertiary studies overseas. Today,
this important sentiment of unity and
camaraderie is still alive and represented
in Navitas' diverse employee, student and
partner base. It is also echoed in the way that
Navitas operates – the Company is proud to
celebrate what makes it unique.
Navitas is committed to providing a
safe and productive workplace for its
8,200 employees around the world, and
continued to report strong results on gender
representation and workplace safety in FY17.
Navitas promotes a workplace that
recognises and embraces the skills,
characteristics and experiences that people
bring to the Group. Accordingly, a diversity
strategy is in place that outlines measurable
objectives to achieve gender diversity within
the Group:
FY17
performance
Male 57%,
female 43%
Male 65%,
female 35%
Male 37%,
female 63%
Target
Non-Executive Director
ratio of 50% male and
50% female
At least 50% of the
next senior executive*
appointments desirably
should be female with
appropriate skills and
attributes
At least 50% of all
employees should be
female with appropriate
skills and attributes
(given our targets were
exceeded, we propose a
new benchmark)
* Senior executives for the purposes of the above table
are defined as members of the Navitas Leadership
Team, the Senior Management Team, the Executive
General Management (EGM) and the senior direct
reports to the EGM of the operating Divisions in total
approximately 160 employees.
Ensuring environmental
awareness and sustainability
Most of Navitas’ global network of more
than 120 campuses and colleges 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 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.
As a part of this sustainability strategy
Navitas:
• Has continued to improve 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 continued to improve the monitoring
of waste generation 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 2016 calendar year, both targets were
exceeded, with average pass rates of 82%,
retention rates at 87% and progression to
partner rates of 94%. Other student and client
outcomes are listed on pages 17-24.
Contributing positively to
our community
The Navitas Education Trust (NET) was
established in 2013 to support charitable
organisations and activities in the
education sector.
Its aim is to increase access to and improve
the quality of education delivered to
disadvantaged learners around the world.
Each year Navitas has provided $500,000
to the NET, with a portion used to support
programs in partnership with charitable
organisations and the remainder held in
trust with the aim of generating funds for
future programs.
Applications for NET grants open in
February each year with a NET management
committee, comprising the Group Chief
Executive Officer and two Non-Executive
Directors, having authority to consider and
approve funding recommendations that align
with Navitas’ corporate responsibility policy.
In FY17, five initiatives were funded, with the
NET making commitments of $560,000 to
support programs delivered over one to three
years. A total of $335,100 was granted to
charitable programs in FY17 through the NET.
An outline of the five programs is below.
• The NET partnered with Rotary Australia
to help the Chiedza Child Care Centre of
Zimbabwe provide access to education
for 395 children and youth in urban and
rural communities in Zimbabwe. The
project benefits boys and girls between
nine and 15 who are orphaned, poor and
vulnerable – and who either failed to start
school by the age of nine, or dropped
out of school before completing the first
seven years of basic education.
Navitas Limited Annual Report 2017 027
• The NET worked with Plan International
for the first time to deliver infrastructure,
training and resources to support children
with disabilities learn alongside their
able-bodied peers across 10 schools in
Dhaka, Bangladesh.
• The NET supported the Australian
Business Community Network (ABCN)
for the fourth year in a row. In FY17,
funding was used to create two new
Navitas-named scholarships to support
high-performing but disadvantaged year
10 students. The scholarships provide
financial support over a three-year
period, along with corporate mentoring,
workshops, program delivery and more,
helping recipients through the last two
years of high school and the first year of
work or tertiary study.
• The NET provided funds to Classroom of
Hope to support activities in four primary
schools in rural Battambang, Cambodia
that improve education access and
quality. This is an extension of an earlier
NET program, with some FY17 funds
used to construct school buildings at one
particularly remote school.
• The NET provided a grant to Room to
Read to construct a new library building
at a needy school in the Uva Province of
Sri Lanka. In particular, this funding has
supported the community engagement
and design phases, as well as the sourcing
of materials and the construction itself.
Navitas also supported a number of other
community activities through FY17, including:
• Providing more than 185 academic
scholarships worth over $1.8m;
• Donating or raising over $20k for a
variety of causes;
• 51 employees volunteered 467 hours
across Australia participating in primary
and high school mentoring programs in
partnership with ABCN; and
• Committing more than 800
management hours to support corporate
responsibility activities.
028 Navitas Limited Annual Report 2017
CORPORATE GOVERNANCE
The Board believes a high level of governance
and transparency is critical in fostering a
productive corporate culture and business
practices. Operating in accordance with
high standards is essential to achieving
sustainable long-term performance and
value-creation.
Role and responsibilities of
the Board
Navitas’ Board of Directors is responsible for
the corporate governance of Navitas and its
subsidiary companies. The Board determines
all matters relating to the strategic direction,
academic quality and governance, policies,
practices, management and operations
of Navitas with the aim of protecting the
interests of the Company’s shareholders and
other stakeholders, including employees,
students and partners.
Without limiting this general role, the
specific functions and responsibilities of the
Board include:
• oversight of the Group, including its
educational outcomes, control and
accountability systems;
• appointing and removing the CEO
(or equivalent), including approving
remuneration of the CEO and the
remuneration policy and succession plans
for the CEO;
•
•
•
ratifying or approving the appointment
and, where appropriate, the removal
of the CFO (or equivalent) or
Company Secretary;
final approval of management's
development of corporate strategy and
performance objectives;
reviewing and ratifying systems of risk
management and internal compliance
and control, codes of conduct and
legal compliance;
• monitoring senior management's
performance and implementation of
strategy, and ensuring appropriate
resources are available;
• approving and monitoring the progress
of major capital expenditure, capital
management and acquisitions and
divestitures; and
• approving and monitoring financial and
other reporting.
Board members
To assist in identifying areas of focus and
maintaining an appropriate mix of skills,
experience, knowledge and diversity, the
People and Remuneration Committee uses
a Board skills matrix that is reviewed on a
regular basis. It is an important component of
the criteria used for Director appointments.
The Board skills matrix contains the mix of
skills, experience, knowledge and diversity
that the Board currently has and is looking
to achieve in its composition. Each of these
areas is currently well represented on the
Board, recognising that each Director may
not necessarily have experience in or fit
within all areas. However, the Board benefits
from the combination of the Directors’
individual skills, experience, knowledge
and diversity.
Independence
A Director is ‘independent’ where he or she is
a Non-Executive Director, is not a member of
management, and is free of any relationship
that could, or could reasonably be perceived
to, materially interfere with the independent
exercise of their judgement. Seven of
eight Directors were independent as at 30
June 2017.
Risk management
The Board is ultimately responsible for risk
management, and must satisfy itself that
significant risks faced by the Group are
being managed appropriately, and that the
system of risk management within the Group
is robust enough to respond to changes in
Navitas' business environment.
The Audit and Risk Committee has the
following responsibilities regarding
risk management:
•
assessing the internal process for
determining and managing key risk areas;
• confirming management's risk appetite
and tolerance;
• ensuring that the Group has an effective
risk management system and that macro
risks to the Group are reported at least
twice a year to the Board;
• evaluating the process Navitas has in
place for assessing and continuously
improving internal controls, particularly
those related to areas of significant risk;
• assessing whether management has
controls in place for unusual types
of transactions and/or any potential
transactions that may carry more than an
acceptable degree of risk; and
• ensuring the continuous development of
risk management in the Group and for
supervising the implementation of risk
management in compliance with the risk
management policy and guidelines.
Navitas Limited Annual Report 2017 029
Board Committees
Two standing Board committees have been established to assist the Board in fulfilling its responsibilities.
BOARD OF DIRECTORS
Audit and Risk Committee
People and Remuneration Committee
Purpose: to assist the Board in fulfilling its corporate
governance and oversight responsibilities.
Purpose: to review and approve the strategies and practices for
people management within Navitas.
FY17 focuses included:
FY17 focuses included:
• Reviewing the independence, objectivity and competency of
Navitas' external auditors
• Monitoring and reviewing the integrity of Navitas'
• Succession planning for the Board and senior executive
• Reviewing and approving executive remuneration policy
• Reviewing the effectiveness of workplace diversity and
financial statements
safety strategies
• Monitoring the performance and outcomes of Navitas'
• Reviewing the Company's FY17 remuneration report
internal audit program
• Reviewing the Company's FY17 Full Year and Interim
financial reporting
Details of Navitas’ compliance with the ASX Corporate Governance Council’s “Corporate Governance Principles and Recommendations
(3rd Edition) for the year ended 30 June 2017 will be disclosed in the Company’s Appendix 4G. This document will be lodged with ASX in
accordance with Listing Rule 4.10. Navitas' Corporate Governance Statement is accessible at www.navitas.com/organisation/investors
030 Navitas Limited Annual Report 2017
NAVITAS LEADERSHIP TEAM
ROD JONES, GROUP CEO
BComm, DEd (Hon) ECU, FAICD
Group Chief Executive Officer and
Managing Director
DAVID BUCKINGHAM
Engineering BTech (Hons), CA UK, UK ACT,
GAICD
Chief Financial Officer
23 years with Navitas
1.5 years 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.
Mr Jones has 46 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 higher 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
awarded the Australian Ernst & 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 a Fellow of the Australian
Institute of Company Directors. He is
also a significant supporter of a number of
charitable causes in Australia.
JOHN WOOD
BEcon (Hons), DPhil
CEO of University Partnerships, Australasia
10 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 Limited Annual Report 2017 031
ROB LOUREY
BBus (HR), ADip PM, MAICD
Head of Human Resources
SCOTT JONES
BComm, GAICD
CEO of Navitas Careers and Industry
PATRICK BROTHERS
BSc, MBA
Chief Development Officer
4 years with Navitas
15 years with Navitas
2.5 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.
Scott was appointed to the role of Chief
Executive Officer Navitas Careers and
Industry Division in December 2016, having
been Global SAE Chief Executive Officer since
2014 and Chief Operating Officer since 2013.
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.
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 strategic
growth, organisational performance and
leadership, both within Navitas and SAE,
and before that within the FMCG sector.
Throughout his career, Scott has gained
significant international experience as well as
contacts and partnerships across the US, UK,
Europe, Asia, Africa and Middle East.
With over 20 years of commercial and
strategic experience, Scott started his
career with Coca Cola Amatil and the Mars
Corporation in sales and marketing roles.
Patrick Brothers joined Navitas in 2014
and as Chief Development Officer and CEO
of Navitas Ventures. He is responsible for
growth and innovation, ensuring Navitas is a
global leader in the future of education. He is
responsible for strategy and transformation,
learning and teaching, Navitas’ global
marketing teams, business development and
new ventures.
Patrick is the Chairman of 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’s focus
included investment and public private
partnerships in infrastructure, technology
and defence across Asia, the US, Europe
and the Middle East. 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.
032 Navitas Limited Annual Report 2017
NAVITAS LEADERSHIP TEAM (CONTINUED)
MICK CAMPBELL
BSc, BSc Statistics (Diploma)
Chief Information Officer
PAUL LOVEGROVE
LLB(Hons) , MBA, MPhil
CEO of University Partnerships, Europe
1 year with Navitas
2 years with Navitas
Mick joined Navitas in 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 Healthcare.
Most recently, Mick worked as the CIO
of Business Transformation at Cerebral
Palsy Alliance, where he was responsible
for formulating and executing IT strategy,
digitsing the organisation, overseeing IT
projects. He held the position of CIO at
Ramsay Healthcare for 8 years – a global,
ASX-listed hospital group operating over
150 hospital 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.
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.
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.
BEV HUDSON
BEd, Grad Dip Lang Studies, MEd
President and CEO of University
Partnerships, North America
10 years with Navitas
Bev has been working in international
education for thirty years in four countries.
The last eleven 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 operations
of the Navitas pathway programs in
North America.
Bev has been involved in all aspects of
international education including curriculum
design, student services, faculty and
administration. She has developed and
implemented the strategic vision for
internationalization at several universities
including internationalizing 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.
Navitas Limited Annual Report 2017 033
034 Navitas Limited Annual Report 2017
DIRECTORS’
REPORT
Navitas Limited Annual Report 2017 035
036 Navitas Limited Annual Report 2017
DIRECTOR'S REPORT
BOARD OF DIRECTORS
Directors
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 36 to 38. Directors were in office for
this entire period unless otherwise stated.
TRACEY HORTON AO
BEcon (Hons) UWA, MBA Stan, Prof Emer,
FAICD, FGIA
Non-Executive Chairman
ROD JONES
BComm, DEd (Hon) ECU, FAICD
Group Chief Executive Officer and
Managing Director
Appointed as a Director since 13 June 2012
and as Chairman since 16 November 2016
Ms Horton has extensive international
business and education experience including
as Winthrop Professor and Dean of the
University of Western Australia’s Business
School. Prior to that she held executive and
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 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.
In 2017, Ms Horton was made an Officer
of the Order of Australia for distinguished
service to business and business education
through a range of leadership and academic
roles, and to the arts in Western Australia.
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 (from
3 May 2012 to 20 November 2015)
Ms Horton is also a member of the Board’s
People and Remuneration Committee.
Appointed 18 June 2004
Mr Jones has 46 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 higher 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
awarded the Australian Ernst & 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. He is also a significant
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.
* Denotes current directorship
Navitas Limited Annual Report 2017 037
TONY CIPA
BBus, Grad Dip Accounting
Non-Executive Director
HARVEY COLLINS
BBus, FCPA, SFFin, FAICD
Non-Executive Director
Appointed 1 May 2014
Appointed 9 November 2004
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 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:
• Healthscope Limited* (from 28 June 2014
to present)
• Skilled Group (from 4 April 2011 to 19
October 2015)
Mr Cipa is also the Chairman of the Board’s
Audit and Risk Committee.
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 director
of Save the Children Australia, Chairman
of Insitor Impact Asia Fund Pte Ltd and 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.
Mr Collins is also a member of the Board’s
Audit and Risk Committee.
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 30 year career across
a variety of sectors.
Ms Eilert is currently a non-executive
director of Super Retail Group (ASX: SUL)
and Essential Energy (previously Networks
NSW) and was previously a Non-Executive
Director of digital business realestate.com.
au (ASX: REA), Veda Group Limited (ASX:
VED), AMP Life and digital start-ups such as
“onthehouse” and OurDeal.
As an executive Ms Eilert has held operational
roles as Group Executive for 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.
In her final executive role, 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)
Ms Eilert is also the Chairman of the Board’s
People and Remuneration Committee.
038 Navitas Limited Annual Report 2017
BOARD OF DIRECTORS (CONTINUED)
JAMES KING
BComm, FAICD
Non-Executive Director
Appointed 9 November 2004
Mr King brings to the Board of Navitas over 30
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,
and the chairman of the Audit & Risk
Committee, of Lovisa Holdings Limited. He
was previously on the board of The Trust
Company Limited, JB Hi-Fi Limited (where
he was also Chairman of its Audit and Risk
Committee), Pacific Brands 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.
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)
Mr King is also a member of the Board’s
Audit and Risk Committee and People and
Remuneration Committee.
* Denotes current directorship
LISA PAUL AO PSM
BA (Hons), FAICD, FACEL, FAIM, FIPAA,
FANZSOG
Non-Executive Director
DAVID ROBB
BSc, GradDip (Personnel Administration),
FAIM, FAICD
Non-Executive Director
Appointed 2 February 2016
Appointed 9 May 2017
Mr Robb has an extensive corporate
background, most recently serving as
Managing Director and CEO of Iluka
Resources for 10 years. As CEO, he
transformed the company’s financial,
commercial and human capabilities and
drove major achievements in shareholder
returns and investment market reputation,
in workforce diversity and employee
engagement and in corporate sustainability
practices. Prior to that, Mr Robb held a
number of senior executive positions at
Wesfarmers, including Executive Director,
and senior roles at BP in Asia, the US, the UK
and Australia.
Mr Robb is also currently a Director of the
Centre for Independent Studies, a Director
of the Melbourne Football Club and Chair
of the Dean’s Council of the Faculty of
Engineering, Computing and Mathematics at
the University of Western Australia. He was
previously Chairman of Consolidated Rutile
Limited and Deputy Chair of Methodist Ladies
College, Perth.
During the past three years Mr Robb has
served as a director of the following other
listed company:
•
Iluka Resources Limited (from 18 October
2006 to 2 September 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 Australia. She
is also on the boards of Social Ventures
Australia, Australian Schools Plus, Australian
Research Alliance for Children and Youth,
High Resolves and the Australia American
Educational Leadership Foundation Ltd. She
is also a member of the Advisory Board to
the Melbourne Accelerator Program and
was appointed to the Government’s Naval
Shipbuilding Advisory Board in January 2017.
Ms Paul is Enterprise Professor, Public Policy
at the University of Melbourne and is a
Councillor of Bond University.
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)
Ms Paul is also a member of the Board’s
People and Remuneration Committee.
Navitas Limited Annual Report 2017 039
040 Navitas Limited Annual Report 2017
DIRECTOR'S REPORT
REMUNERATION REPORT
This Report outlines the remuneration arrangements in place for the key management personnel (KMP) of Navitas Limited. The KMP are the
Group Chief Executive Officer and certain Navitas senior executives, together referred to in this Report as ‘executives’, and the non-executive
directors. The disclosures are in accordance with the requirements set out in section 300A of the Corporations Act 2001 (Cth).
The Report comprises the following sub sections:
1. Frequently Asked Questions
2. Key Management Personnel (KMP)
3. FY17 remuneration outcomes and link with performance
4. Executive remuneration objective, structure and review
5. Executive statutory remuneration tables
6. Non-executive director fees and statutory remuneration table
7.
Remuneration governance
8. Additional required disclosures
1. Frequently Asked Questions
Page number
40
42
43
44
48
50
51
52
This section provides an overview of the key questions Navitas’ shareholders may have in relation to KMP remuneration arrangements.
Remuneration policy
How are executives at Navitas remunerated? Navitas executives are remunerated in two parts:
1) Fixed remuneration, which is used to attract and retain executives with the talent and skills
to support the Group’s objectives; and
2) Variable remuneration, which is paid utilising an executive incentive plan, based on Group
and individual performance.
How is fixed remuneration determined?
Fixed remuneration for each role is set by the Board through the People and Remuneration
Committee (PRC) and is based on comparable roles in like companies.
Fixed remuneration is reviewed annually based on individual and Group performance as well
as market data. Navitas aims to pay at the 50th percentile of fixed remuneration levels for
comparable organisations.
How are variable payments for individual
executives set?
A percentage of each executives’ fixed remuneration is set as Target Variable Pay (TVP).
This ranges from 40% to 75% of fixed pay depending on the executive’s role and level
of responsibility.
Fixed and variable remuneration are set to provide a market competitive total
remuneration package.
The policy for this is specified in Navitas’ executive incentive plan.
How are incentives determined for
executives working in Group or business
unit roles?
Growth targets for the Group and each business unit are set, with Group executives tied to
the Group EVA®3 result and business unit executives tied to their business unit and Group
EVA® results.
How are incentive payments funded?
Incentive payments are funded based on the year-on-year growth in Economic Value Added
(EVA®) achieved by the Group or business unit against pre-established targets set by the Board.
How is the executive incentive plan pool
determined?
The incentive pool is based on the combined TVP of participants and how well the Group and its
business units performed against the EVA® growth targets set by the Board.
If targets are exactly met, the incentive plan pool will be equal to the combined TVP of
participants. If targets are not achieved, the pool will be lower, if targets are exceeded, the pool
will be higher. The size of the pool is uncapped for achievement above the target.
3 EVA® is a registered trademark of Stern Stewart & Co.
Navitas Limited Annual Report 2017 041
1. Frequently Asked Questions (continued)
Remuneration policy (continued)
What growth targets are used to determine
the incentive pool?
Growth targets are set by the Board for a three-year period, with the three-year target broken
down into annual growth targets. Incentive funding is determined each year based on EVA®
growth achieved against those annual targets.
What is EVA® and how is it calculated?
How are incentive payments and the EVA®
pool linked?
Can incentives be deferred or forfeited?
We do not disclose the growth targets set by the Board as they are commercially sensitive.
In setting the target for FY15 - FY17, the Board gave consideration to corporate plans,
shareholder return expectations, industry developments, as well as comparative performance
analysis prepared by independent consultancy Juno Partners of the top 300 Australian listed
companies over 2009 – 2013.
The executive incentive plan is based on sustained improvements in the financial performance
of Navitas, as measured by EVA®. EVA® measures the profit Navitas makes above and beyond
what investors could expect to earn, had their funds been invested elsewhere at similar risk.
For EVA® calculations see page 43.
While the combined TVP of participants and financial performance against pre-set targets
determines the maximum size of the pool, the share of that pool that the executive receives is
subject to an assessment of their individual performance.
For executives, rewards are uncapped and any amount, positive or negative, may be declared.
Amounts between zero ($0) and an executive’s TVP opportunity are settled in the current year.
Any amount over their TVP or below zero is settled in three equal parts - the first in the current
year and the remainder in the two years that follow.
What happens if EVA® growth declines?
If EVA® growth is substantially below target, a negative amount is declared reducing the value of
any previously deferred amounts and any future payments under the plan.
What happens to the deferred amount if an
executive leaves?
An executive must be in employment at the time the Board approves the incentive payment
made under the executive incentive plan to be eligible for the payment.
If an executive ceases employment for any reason before the Board approves the payment,
the executive is not eligible for any payment in respect of the period that the executive was in
employment or any deferred balances.
Do executives have to maintain a Navitas
shareholding?
Executives have to allocate at least 50% of any incentive payment to purchase shares until the
executive has established a holding in Navitas equal to the value of their fixed remuneration.
FY17 outcomes
What are the remuneration outcomes for
FY17?
Fixed remuneration
Most executives received a fixed remuneration increase, effective 1 October 2016, of 2.0% to
reflect market comparability and individual performance. The Chief Executive Officer - SAE
received a fixed remuneration increase of 17.7% to recognise additional responsibilities as well
as reflecting market comparability.
Variable remuneration
The Group financial performance did not meet minimum EVA® achievement expectations and
a negative incentive declaration of minus 0.3x is expected for Group executives, including the
Chief Executive Officer and Chief Financial Officer. The Group financial profit performance was
impacted by a number of factors including the final impact of the closure of Macquarie and
Curtin Sydney Colleges, a slowdown in growth in the UK through the post-Brexit tightening of
international student visa regulations and adverse foreign currency translation movements in
some overseas businesses.
For business unit executives the expected range of incentive declarations across executives is
from minus 0.6x to 0.8x, depending on the EVA® created by each business unit.
This is consistent with the objective of the plan, which is to base variable rewards on sustained
growth in EVA® being achieved.
042 Navitas Limited Annual Report 2017
REMUNERATION REPORT (CONTINUED)
1. Frequently Asked Questions (continued)
Changes to the remuneration policy for FY18
Are there any changes to fixed remuneration
for FY18?
Fixed remuneration will remain unchanged.
Are there any changes to variable
remuneration for FY18?
In FY18 there will be an increase in the TVP opportunity for executives. This will move the total
target remuneration (that is, fixed remuneration plus variable remuneration) opportunity for
these executives more in line with the market, where we aim to pay at the 50th percentile of
similar roles.
The individual TVP opportunity for executives will move from a range of 40% to 75% of fixed
remuneration, to a range of 60% to 150% of fixed remuneration.
Importantly, with other changes planned, the total TVP pool of the scheme will not increase
from FY17 to FY18.
Are there any other changes?
Changes to the treatment of individual performance
As noted above, historically the incentive pool was determined based on financial performance
and then an executive’s share of the incentive pool was modified up or down based on individual
performance.
Beginning in FY18, 40% of an executive’s share of the incentive pool will be subject to individual
performance, with this amount only rewarded in full for exceptional individual performance.
This change allows for greater emphasis to be placed on non-financial performance, with
targets being set and performance assessed in the context of corporate plans, shareholder
return expectations, and industry developments amongst other things, and therefore
recognising the importance of strategic non-financial initiatives to the Group’s long term
success.
It should be noted that the funding of the incentive pool will not be changed, i.e. rewards will
be subject, at first instance, to financial performance against the pre-set targets determined
by the Board. If an executive is assessed not to have reached acceptable levels of individual
performance, they will not be eligible for any variable rewards.
Increase in weighting of Group performance for financial KPIs
Executives working in business unit roles have historically had rewards weighted 70% to
business unit financial performance and 30% to Group financial performance.
Beginning in FY18, this weighting will be amended to 50% business unit performance, 50%
Group performance. This will increase focus on Group outcomes and will encourage further
collaboration between executives to improve overall performance.
Executives’ deferred incentive element
The amount and method of how executives accrue a Navitas shareholding is currently being
reviewed. Further details will be provided in the FY18 report when any changes are finalised.
2. Key Management Personnel (KMP)
The following were KMP at any time during the 2017 financial year and, unless otherwise indicated, were KMP for the entire year.
(i) Non-Executive Directors
Tracey Horton
Non-Executive Chairman (appointed as Chairman from Non-Executive Director 16 November 2016)
Tony Cipa
Non-Executive Director
Harvey Collins
Non-Executive Director (Chairman until 16 November 2016)
Diana Eilert
James King
Lisa Paul
David Robb
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed 9 May 2017)
Navitas Limited Annual Report 2017 043
(ii) Executive Director
Rod Jones
Group Chief Executive Officer and Managing Director
(iii) Executives
Patrick Brothers
Chief Development Officer
David Buckingham
Chief Financial Officer
Mick Campbell
Chief Information Officer
Bev Hudson
Scott Jones
Rob Lourey
Chief Executive Officer – University Partnerships North America
Chief Executive Officer – Careers & Industry
Group General Manager - Human Resources
Paul Lovegrove
Chief Executive Officer – University Partnerships Europe
John Wood
Chief Executive Officer – University Partnerships Australasia
3. FY17 remuneration outcomes and link with performance
The Group financial performance did
not meet minimum EVA® achievement
expectations and a negative incentive
declaration of minus 0.3x is expected
for Group executives, including the Chief
Executive Officer and Chief Financial Officer.
For business unit executives the expected
range of incentive declarations across
executives is from minus 0.6x to 0.8x,
depending on the EVA® created by each
business unit.
Any negative incentive declarations are
settled over three years, reducing the value
of previously deferred amounts and the value
of future declarations.
The lower rewards declared in FY17 reflect
the Group’s financial profit performance
which was impacted by a number of factors
including the final impact of the closure of
Macquarie and Curtin Sydney Colleges,
a slowdown in growth in the UK through
the post-Brexit tightening of international
student visa regulations and adverse foreign
currency translation movements in some
overseas businesses.
These declared incentive amounts are
consistent with the objective of the plan,
which is to base variable rewards on
sustained growth in EVA® being achieved.
Final incentive payments are subject to Board
determination in September 2017.
Economic Value Added (EVA®) calculation
The table below outlines how the FY17 EVA® outcome was calculated, and compares to FY16.
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®
EVA® decrease
2017
$000s
2016
$000s
155,048
1,691
(32,259)
124,480
(37,344)
87,136
469,882
8%
37,591
49,545
60,286
164,581
2,216
(30,767)
136,030
(40,809)
95,221
436,694
8%
34,935
60,286
62,861
(10,741)
(2,575)
# non-operating profits and losses are excluded from the EVA® calculation
* based on the average of month end net debt and equity balances throughout the year, after adjustments.
Cash bonuses for participants have been provided for in the financial statements for 30
June 2017, but as noted above, are subject to review and confirmation by the Board in
September 2017.
Target Variable
Pay (TVP)
x
EVA®
performance
=
EVA® incentive
declared
+/—
Individual
performance
=
Final
payment
TVP ranges from
40%—75% of fixed
pay depending
on responsibility
Corporate staff are tied
to the Group EVA® result,
business unit staff are
tied to the business unit
and Group EVA® result.
Executives are
uncapped on
the upside and
the downside
Individual performance
is determined by the
Chief Executive
Officer or Board.
For executives , if the
payment is in excess of
their TVP, two thirds of
the amount above
their TVP is deferred
at risk for two years.
044 Navitas Limited Annual Report 2017
REMUNERATION REPORT (CONTINUED)
3. FY17 remuneration outcomes and link with performance (continued)
FY08-FY17 Navitas financial performance and alignment to remuneration outcomes
The following table outlines Navitas’ performance on key metric of sustainable value creation for the past 10 years.
(12 months ended 30 June)
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
Economic Value Added (EVA®) ($m)
49.55
60.29
62.86
51.78
46.10
38.12
57.88
54.53
40.64
27.29
Dividends per share –
paid and proposed (cents)
Dividends paid ($m)
19.5
70.4
19.5
74.1
19.5
73.3
19.5
72.8
19.5
72.8
19.5
80.3
20.7
68.7
18.8
57.8
14.3
40.1
10.9
33.7
Closing share price (at 30 June)
$4.85
$5.49
$4.29
$7.13
$5.77
$4.34
$4.03
$4.66
$2.73
$2.09
Earnings per share (cents)
22.1
24.0
19.1
13.7
19.9
19.5
21.7
18.8
14.3
10.8
Earnings per share before amortisation
and impairment (cents)
Net profit after tax attributable to
members of the Company ($m)
Return on capital employed
22.2
24.2
24.5
22.1
20.0
19.8
22.9
19.4
14.6
12.2
80.34
18%
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%
4. Executive remuneration objective, structure and review
Navitas’ remuneration objective is to provide
competitive rewards to attract high calibre
executives that can drive the continued
strong performance of the business. At the
heart of the Group’s approach is:
• an executive incentive plan structured to
align the interests of executives with those
of the Company’s shareholders; and
•
the establishment of appropriate
performance benchmarks that link both
fixed and variable remuneration with
Group strategy, the strategy of individual
business units and goals set for each
executive’s individual performance.
Alignment of executive and
shareholder interests
Captures all at-risk pay
Executives are assigned a level of Target
Variable Pay (TVP) which is based on a
percentage of their fixed remuneration. In
FY17, this varied from 40% to 75% of fixed pay,
depending on the seniority of the executive.
The executive incentive plan comprises
the entire at-risk opportunity offered to
executives.
Based on shareholder value
Linked with Navitas’ financial performance
The executive incentive plan is based on
sustained improvements in the financial
performance of the Group and its business
units, as measured by EVA®.
EVA® measures the profit the business makes
above the Group’s current cost of capital of
8%. 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 EVA® 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 year4.
The Board sets the required return for
investors used to calculate EVA® annually
and may make amendments to the statutory
profit to calculate EVA® without affecting the
underlying integrity of the plan.
Growth targets are set by the Board for a
three-year period, with the three-year target
broken down into annual growth targets.
Incentive funding is determined each year
based on EVA® growth achieved against
those annual targets.
This is applied to the executive’s TVP
and amended for individual performance
to determine the incentive declared for
the executive.
Incentive formula
The Board also gives consideration to the
levels of performance that would justify
extreme rewards, both on the upside and on
the downside, while ensuring the reward in
either direction is symmetrical.
4 Excluding investment companies, as determined by Juno Partners, an independent consultancy appointed by the Board.
Navitas Limited Annual Report 2017 045
The diagram below illustrates the working of the
incentive formula as it applies at the Group and
business unit level throughout Navitas.
Multiple of
Target Variable Pay
The incentive formula
Rewards above TVP are deferred and can be
forfeited if not sustained
For executives, rewards are uncapped and
any amount, positive or negative, may be
declared. Amounts between $0 and the
executive’s 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 years that follow.
Deferred amounts can be lost if the
executive’s participation in the scheme ends
for whatever reason, or if future EVA® growth
falls substantially below target.
Any deferred amounts do not vest with the
executive and are not paid on the termination
of their employment.
Incentive declarations can be negative
If EVA® growth falls substantially below
target, executives can suffer a negative
incentive declaration. Negative incentive
declarations are settled over three years,
reducing the value of previously deferred
amounts and the value of future declarations.
Subject to additional requirements
Total payments to executives participating
in the plan must be approved by the Board
each year.
To further strengthen the link between
executive performance and shareholder
return, executives are required (over time)
to acquire a beneficial interest in shares in
the Company equal to the value of their fixed
remuneration. Ordinary shares are issued
at a price calculated as a volume weighted
average market price for the five trading days
immediately before the date of issue.
2.0x
1.0x
0.0x
Annual
growth
in EVA®
Exceptionally
poor
Good
Exceptionally
good
During early FY17 the Board approved
the following change in how an executive
may satisfy the requirement to acquire a
beneficial interest of shares in the Company
equal to the value of their fixed remuneration.
Current and future incentive payments
An executive has to allocate at least 50% of
any incentive payment, up to and including
a one times EVA® multiple, to purchase
shares in the Company.
Prior years incentive payments
An executive had to allocate at least 50% of
any incentive payment to purchase shares
in the Company.
This requirement results in all executives
acquiring a meaningful exposure to the
performance of Navitas shares, funded out of
the proceeds of their incentive payments.
Focused on sustained, multi-year performance
While payments under the executive
incentive plan are made in cash and
classified under the accounting standards
as 'short-term benefits', there are several
elements in the plan that enable rewards to
reflect sustained, multi-year performance,
including:
• payments reflecting 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 executive ceases to be a participant in
the plan for whatever reason; and
• at least 50% of any payment, up to and
including a one times EVA® multiple,
must be used to purchase shares until
the executive has established a holding
in Navitas equal to the value of their
fixed remuneration.
046 Navitas Limited Annual Report 2017
REMUNERATION REPORT (CONTINUED)
4. Executive remuneration objective, structure and review
Link with business strategy
A significant portion of executive remuneration is ‘at risk’, with payment determined annually through the Company’s executive incentive plan
based on the achievement of pre-determined Group, business unit and individual targets. These targets link directly with Navitas’ business
strategy.
Business strategy
Business performance - EVA®
Navitas’ business strategy is built
on three core pillars
EVA® is the key way we measure our business
performance against our strategic objectives
Quality
Efficiency
Growth
2017
$000s
2016
$000s
Economic Value Added (EVA®)
49,545
60,286
Opening EVA®
EVA® decrease
60,286
62,861
(10,741)
(2,575)
Pool
Executive
EVA® performance
EVA® represents the profit above and beyond
what investors could expect to earn
Executive incentive plan
What executives are paid is a direct
outcome of EVA® performance
EVA® is a key financial measure of the executive
incentive plan. Minimum EVA® achievement must be met
before any incentive payments are made.
The FY17 executive incentive plan outcome
for the CEO and MD is expected to be negative
FY17 average outcomes for other executives
are expected to range between minus 0.6x and 0.8x
Navitas Limited Annual Report 2017 047
Remuneration structure
An outline of our executive remuneration structure, determination and purpose is below.
Executive remuneration at Navitas
Fixed remuneration
Incentive (variable)
Delivered to the individual as
• Cash
• Superannuation
•
Fringe benefits such as motor vehicles
• Cash
•
Requirement to purchase equity with
a portion to support achievement of
minimum shareholding requirements
Individual payment / outcome determined by
Reviewed annually to ensure it is
commensurate with Company and individual
performance, as well as consistent with
market rates for comparable executive roles
EVA® performance and individual
performance
Purpose and alignment
To attract and retain leaders that
can drive the continued strong
performance of our business
To share the financial success of the
Company with executives, be competitive
with comparable organisations and align
executive pay with Navitas strategy and the
interests of shareholders
Remuneration review
The PRC reviews the level and composition of executive remuneration each year, benchmarking
against the Group’s peers. The proportion of fixed and variable remuneration for each executive
is set by the PRC or the Group Chief Executive Officer. The on target remuneration mix for FY17
is set out below.
Group
CEO & MD
Other
KMP
57%
43%
67% - 71%
29% - 33%
Fixed
remuneration
Variable, at risk,
remuneration
048 Navitas Limited Annual Report 2017
REMUNERATION REPORT (CONTINUED)
5. Executive statutory remuneration tables
The remuneration reported below is in accordance with both statutory requirements under the Corporations Act 2001 (Cth) and Australian
accounting standards.
Year ended 30 June
Short term benefits
Salary &
Fees
Cash
bonus (i)
Non-
monetary
benefits
Post-
employment
Superannuation
Other
long term
benefit (ii)
Total
Performance
related %
2017 ($)
Executive Director (iv)
Balance of
Deferred
Cash
Bonuses
(iii)
Rod Jones
1,004,450
90,776
6,000
35,000
22,841 1,159,067
8%
(195,557)
Other Key Management Personnel (iv)
Patrick Brothers
David Buckingham
Mick Campbell
Bev Hudson^
Scott Jones@
Rob Lourey
Paul Lovegrove*
John Wood
589,384
566,227
348,785
21,951
14,809
-
385,551
254,490
535,772
183,823
411,054
276,701
480,309
15,887
18,696
15,305
-
23,158
73,714
2,378
-
-
-
-
19,616
19,616
19,616
21,841
14,712
28,112
61,434
42,416
14,912
645,863
13,518
637,328
8,595
450,710
-
664,260
12,703
747,010
11,890
466,943
-
356,831
15,121
553,151
3%
2%
-
38%
25%
3%
5%
3%
(83,661)
(91,350)
(45,675)
-
(1,639)
(39,361)
(80,454)
19,785
4,598,233
615,737
105,250
262,363
99,580 5,681,163
11%
(517,912)
2016 ($)
Executive Director (iv)
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
507,642
84,954
David Buckingham(1)
Mick Campbell(2)
Bev Hudson(3),^
Scott Jones*
Rob Lourey
Paul Lovegrove(3),*
John Wood
Lyndell Fraser(4)
Neil Hitchcock(5)
Bryce Houghton(6)
245,863
39,217
162,854
30,961
4,060
57,975
578,880
256,854
409,467
130,705
478,851
449,238
408,780
769,893
60,369
13,942
81,441
-
-
-
12,183
3,147
5,504
941
-
-
-
-
-
6,968
63,671
19,308
13,196
637,283
8,367
2,827
8,143
-
23,133
29,046
36,149
27,680
14,481
8,833
-
-
-
-
288,338
51,608
229,913
835,734
9,550
502,519
-
173,693
11,451
607,892
-
-
-
476,918
430,229
842,397
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
(1) Appointed 25 January 2016
(2) Appointed 23 May 2016
(3) Appointed 2 February 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
^ Remuneration is settled in Canadian Dollars. For the year ended 30 June 2017, an average exchange rate of CAD1.00039/AUD has been used to translate the remuneration into Australian Dollars.
@ Remuneration for the period to October 2016 was settled in Great British Pounds. For the year ended 30 June 2017, an average exchange rate of GBP0.58651/AUD has been used to translate this
remuneration into Australian Dollars.
* Remuneration is settled in Great British Pounds. For the year ended 30 June 2017, an average exchange rate of GBP0.59479/AUD has been used to translate the remuneration into Australian Dollars.
(i) Cash bonus comprises the annual incentive (executive incentive plan) payments payable in September of each financial year after review and confirmation by the Board. Under the terms of the plan
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 2017 financial year, adjusted for the
difference between the amount provided for in the 2016 financial year and the actual amount paid in September 2016.
(ii) Other long term benefits include movements in Long Service Leave.
(iii) Deferred Cash Bonuses are the balances for executives who hold a position as KMP at 30 June, and who are participants in the executive incentive plan. As noted on page 45 of the Directors’ Report,
for some participants in the executive incentive plan, rewards outside of the range of zero ($0) to the participant’s Target Variable Pay (1x target) are settled in three equal parts, the first in the current year
and the remainder in the two years 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. The Board may use its discretion to continue the vesting in some circumstances
For the purposes of the Remuneration Report the Balance of Deferred Cash Bonuses does not form part of compensation for the year.
A negative balance of deferred cash bonuses represents when EVA® growth falls substantially below target and executives can have received a negative incentive declaration. Negative incentive
declarations are settled over three years, reducing the value of previously deferred amounts and the value of future declarations.
(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.
Navitas Limited Annual Report 2017 049
Executive employment contracts
Remuneration and other terms of employment for the executives are formalised in employment contracts. A summary of the key employment
contract terms for each executive is provided below. All executives’ employment contracts are for an unlimited duration.
None of the non-executive Directors have an employment contract with the Company.
Executive
Rod Jones2, 3, 4
Patrick Brothers
David Buckingham
Mick Campbell
Bev Hudson
Scott Jones4, 5
Rob Lourey
Paul Lovegrove6
John Wood4,5
By Executive
By Navitas
Termination for Material Change
Notice period1
6 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
6 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
6 months by Company; 3 months by Executive
6 months by Company; 2 months by Executive
6 months by Company; 2 months by Executive
1 Instead of giving the notice set out in the table above, the Company may terminate by paying remuneration equivalent to the notice period.
2 Material Change is defined as there being a material diminution in the executive’s remuneration or responsibilities, or the executive is required to relocate outside their home state.
3 Where the executives’ contract terminates as a result of a material change, the executive will be entitled to a payment equivalent to six months fixed remuneration.
4 Material Change is defined as there being a material diminution in the executive’s responsibilities, or the executive is required to relocate outside their home state, or where a third party
acquires a controlling interest in the Company.
5 Where an executive’s contract terminates as a result of a material change, they will be entitled to a payment equivalent to three months fixed remuneration.
6 The 3 month notice period by the Company applies during the first five years of employment (employment commenced 20 July 2015).
050 Navitas Limited Annual Report 2017
REMUNERATION REPORT (CONTINUED)
6. Non-executive director fees and statutory remuneration table
Fee pool
Year ended 30 June
Short term benefits
2017 ($)
Salary & Fees ($)
Post-employment
Superannuation
Total
Tracey Horton(1)
Tony Cipa
Harvey Collins(2)
Diana Eilert
James King
Lisa Paul
David Robb(3)
2016 ($)
Harvey Collins
Tony Cipa
Diana Eilert
Tracey Horton
James King
Lisa Paul(4)
(1) Appointed as Chairman 16 November 2016
(2) Chairman until 16 November 2016
(3) Appointed 9 May 2017
(4) Appointed 2 February 2016
204,435
127,854
153,915
123,059
126,000
115,068
16,677
17,439
12,146
26,258
11,691
-
10,932
1,584
221,875
140,000
180,173
134,750
126,000
126,000
18,261
867,009
80,050
947,059
234,905
127,854
115,068
127,854
126,000
47,489
35,095
12,146
10,932
12,146
-
4,511
270,000
140,000
126,000
140,000
126,000
52,000
779,170
74,830
854,000
The maximum aggregate fee pool approved
by shareholders at the 2013 AGM for non-
executive directors is $1,100,000 per annum
(inclusive of superannuation). The aggregate
fee pool is generally reviewed by the Board
annually and, if appropriate, adjusted, having
regard to the anticipated time commitment,
workload and responsibilities attaching to
that office and having regard to the level of
fees paid by comparable organisations in
the market. The fee pool will not increase
for FY18.
Fee policy
Board /
Committee
Chair fee
$
Member
fee $
Board base fee
270,000
126,000
Audit and risk
People and
remuneration
14,000
14,000
nil
nil
The above fees are inclusive of
superannuation.
Non-executive directors receive a base
fee for their services as a director of the
Board, including their membership of
committees. Chairing a Committee attracts
a higher fee rate. The Chairman of the Board
receives a higher base fee in recognition
of the additional responsibility and time
commitment, however does not receive any
extra remuneration for participating in or
chairing any Committees.
In setting the non-executive directors’ fees,
the following considerations are taken into
account to enable the Board to attract and
retain directors:
•
time commitment;
• workload;
•
•
risk and responsibility;
individual background, skills and
experience; and
• market benchmark data, sourced
from companies with a similar market
capitalisation.
In order to maintain independence,
non-executive directors do not receive
performance-related remuneration and do
not participate in the executive incentive
plan. This allows the focus of the Board to be
on the governance of the strategic direction
of Navitas.
Navitas Limited Annual Report 2017 051
7. Remuneration governance
People and Remuneration
Committee (PRC)
The PRC is responsible for determining and
reviewing compensation arrangements for
the directors, the Group Chief Executive
Officer (Group CEO) and the executives.
The PRC assesses the appropriateness of
the nature and amount of remuneration
of directors and executives on an annual
basis by reference to relevant employment
market conditions. The overall objective is
to maintain maximum shareholder benefit
from the retention of a high-quality Board and
executive team.
Use of remuneration consultants
During FY17, the PRC engaged Ernst & Young
(EY) and Juno Partners to provide advice on
remuneration matters.
A remuneration recommendation, as defined
in the Corporations Act 2001 (Cth), was
provided by Juno Partners in relation to the
Navitas incentive program used throughout
the Group. The recommendation provided
covered the targets to be used to determine
rewards at the Group and business unit level
for the 2018–2020 financial years.
The Juno Partners engagement involved
making a remuneration recommendation to
the PRC that affected KMP. The consideration
payable for this engagement was $27,125,
excluding GST.
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 PRC or another non-
executive director;
•
the role of executives in any
engagement regarding a remuneration
recommendation is limited to the
provision of information and opinions
on current and past practices and does
not include any participation in the
development of recommendations;
•
remuneration recommendations by
remuneration consultants are made
directly to the PRC; 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.
With respect to remuneration
recommendation made during the year and
disclosed above, the procedures outlined
above were adhered to and hence the
Board is satisfied that the remuneration
recommendations made were free of
undue influence by the KMP to whom the
recommendations related.
052 Navitas Limited Annual Report 2017
REMUNERATION REPORT (CONTINUED)
8. Additional required disclosures
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:
Year ended 30 June
Short term benefits
Post employment benefits
Other long term benefits
2017
$000s
6,186
342
100
6,628
2016
$000s
6,849
288
51
7,188
The detailed compensation of each member of key management personnel of the Company is set out on pages 48 to 50.
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
KMP, including their related parties, is as follows:
Additions
Disposals
Balance at
30 June 2016
Additions*
Disposals
Balance at
30 June 2017
(i) Directors
Tracey Horton
Rod Jones
Tony Cipa
Harvey Collins
Diana Eilert
James King
Lisa Paul (1)
David Robb(2)*
Balance at
1 July 2015
2,000
45,017,995
10,000
43,948
-
50,000
-
-
4,000
100,000
-
-
-
-
-
-
45,123,943
104,000
(1) Appointed 2 February 2016
(2) Appointed 9 May 2017
* Shares held at date of appointment recorded as an addition in above table.
-
-
-
-
-
-
-
-
-
-
6,000
45,117,995
10,000
43,948
-
50,000
-
-
7,000
-
10,000
-
6,500
-
6,500
20,000
45,227,943
50,000
Balance at
30 June 2016
Additions
Disposals^
-
-
-
-
-
-
-
-
-
-
13,000
45,117,995
20,000
43,948
6,500
50,000
6,500
20,000
45,277,943
Balance at
30 June 2017
11,499
23,768
-
-
-
-
-
2,200,136
24,161
-
122,321
(ii) Executives
Patrick Brothers
David Buckingham (3)
Mick Campbell (4)
Lyndell Fraser (5)
Neil Hitchcock(6)
Bryce Houghton (7)
Bev Hudson(8)
Scott Jones
Rob Lourey
Paul Lovegrove(8)
John Wood
Balance at
1 July 2015
Additions
Disposals^
-
-
-
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
4,526
2,218
-
-
-
-
-
-
4,063
-
-
-
-
-
-
-
-
(10,000)
-
-
-
2,719,821
68,909
(407,652)
2,381,078
10,807
(10,000)
2,381,885
(3) Appointed 25 January 2016
(4) Appointed 23 May 2016
(5) Resigned 30 June 2016
(6) Resigned 26 February 2016
(7) Resigned 30 September 2015
(8) Appointed to the Navitas Leadership Team effective 2 February 2016
^ Shares held at date of resignation recorded as a disposal in above table.
The Navitas Limited Remuneration Report ends here.
Navitas Limited Annual Report 2017 053
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:
Directors
Ordinary shares held
Tracey Horton
Rod Jones
Tony Cipa
Harvey Collins
Diana Eilert
James King
Lisa Paul
David Robb
13,000
45,117,995
20,000
43,948
6,500
50,000
6,500
20,000
Navitas Limited has no outstanding options at the date of this report.
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:
Directors’ meetings
Audit and Risk
People and Remuneration
Number of
meetings held
while a director
Number of
meetings
attended
Number of
meetings
held while a
committee
member
Number of
meetings
attended
Number of
meetings
held while a
committee
member
Number of
meetings
attended
Meetings of Committees
5
-
-
-
5
5
5
-
5
-
-
-
5
4
5
-
The Company has paid premiums of
$136,425 in respect of contracts insuring
each Director, officer, company secretary
and certain senior executives and employees
serving as officers on wholly owned or partly
owned companies of Navitas against liability
incurred in that capacity. Disclosure of the
nature of the liability covered by and certain
other premiums payable for such insurance
is prohibited by confidentiality clauses in the
contracts of insurance.
Tracey Horton
Rod Jones
Tony Cipa
Harvey Collins
Diana Eilert
James King
Lisa Paul
David Robb*
* Appointed 9 May 2017
9
9
9
9
9
9
9
1
All Directors were eligible to attend all
meetings held, unless specified.
Committee membership
Throughout the year and 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:
Audit and Risk
People and
Remuneration
Tony Cipa
(Chairman)
Harvey Collins
James King
Diana Eilert
(Chairman)
Tracey Horton
James King
Lisa Paul
9
9
9
9
9
8
9
1
-
-
5
5
-
5
-
-
-
-
5
5
-
4
-
-
Indemnification and insurance of
directors and officers
The Company’s constitution requires the
Company to indemnify each officer of the
Company and its wholly owned subsidiaries
against any liability (to the extent the
Company is not precluded by law from doing
so) incurred by the officer in their capacity
as an officer of the Company or its wholly
owned subsidiaries. The Company has also
entered into deeds of access, indemnity and
insurance with each of its Directors, company
secretaries, certain senior executives, and
employees serving as officers on wholly
owned or partly owned companies of Navitas
that require the Company to indemnify those
Directors, officers or employees against any
liability (again to the extent the Company is
not precluded by law from doing so) incurred
by them in their capacity as a director or
officer of the Company or the relevant
subsidiary or partly owned company.
054 Navitas Limited Annual Report 2017
DIRECTOR'S REPORT (CONTINUED)
Company secretaries
Dividends
Final dividend recommended
- on ordinary shares for 2017
Interim dividend paid during the year
- on ordinary shares
Final dividend paid for 2016
- on ordinary shares
Significant changes in the state
of affairs
There has been no significant change in the
state of affairs of the Company since the end
of the financial year.
Since the reporting date, the Directors
declared a final dividend on ordinary shares
in respect of the 2017 financial year. The
total amount of dividend is $36.186m, which
represents a fully franked dividend of 10.1
cents per share. The dividend has not been
provided for in the 30 June 2017 financial
statements as the dividend was declared
after the end of the financial year.
Future developments
Likely developments in, expected results of
the operations of the Group in subsequent
years and the Group’s business strategies
are referred to elsewhere in this report,
particularly on pages 6 to 27. 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 laws 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.
Hugh Hangchi, LLB, BComm
Company Secretary &
Group General Counsel
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
Assistant Company Secretary &
Senior Legal Counsel
Appointed as Assistant Company Secretary
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 6 to 27.
Cents
$000s
Payment date
10.1 36,186 15 September 2017
9.4 33,794 15 March 2017
9.9 36,593 15 September 2016
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 to the financial statements.
Auditor’s independence
declaration
The auditor’s independence declaration is set
on page 55 and forms part of the directors’
report for the financial year ended 30
June 2017.
Independent Audit and
Remuneration Report
The required disclosures as included
on pages 40 to 52 of the 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.
ROD JONES
Group Chief Executive Officer
and Managing Director
Perth, Western Australia, 31 July 2017
Navitas Limited Annual Report 2017 055
FINANCIAL
STATEMENTS
AND NOTES
Navitas Limited Annual Report 2017 057
058 Navitas Limited Annual Report 2017
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2017
Revenue
Marketing expenses
Academic expenses
Administration expenses
Net gain on disposal of controlled entities
Finance costs
Share of net profit/(loss) of entities 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
2017
$000s
2016
$000s
2
955,195
1,010,651
(145,579)
(218,787)
(466,953)
14,263
(7,469)
271
(159,372)
(242,789)
(473,209)
-
(6,214)
(974)
130,941
128,093
9
3.2
4.4
3.4
(50,072)
(37,330)
80,869
90,763
1,008
1,831
(366)
5,969
(133)
1,042
2,473
6,878
83,342
97,641
80,337
532
90,078
685
80,869
90,763
82,851
491
96,175
1,466
83,342
97,641
3.6
Cents
Cents
22.1
22.1
24.0
24.0
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 30 June 2017
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
Other financial assets
Total Non Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Deferred revenue
Current tax payable
Borrowings
Provisions
Total Current Liabilities
Non Current Liabilities
Trade and other payables
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
Navitas Limited Annual Report 2017 059
Note
2017
$000s
2016
$000s
4.2
4.3
3.4
4.4
4.1
4.5
3.4
5.2
4.6
4.5
5.2
4.6
5.5
86,642
141,054
31,902
78,919
121,925
23,777
259,598
224,621
172,528
32,616
25,620
408,546
2,538
131,551
47,549
4,216
411,443
1,490
641,848
596,249
901,446
820,870
127,754
262,112
3,890
3,099
11,395
139,640
272,707
4,057
-
16,339
408,250
432,743
50,906
269,567
16,985
23,555
135,093
19,680
337,458
178,328
745,708
611,071
155,738
209,799
110,511
2,648
(731)
42,417
177,095
1,416
(2,013)
32,467
154,845
208,965
893
834
155,738
209,799
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
060 Navitas Limited Annual Report 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received from equity accounted entities
Lease incentive contributions received
Interest received
Interest paid
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of controlled entities
Net cash disposed on disposal of controlled entities
Purchase of other investments
Net cash flows used in investing activities
Cash flows from financing activities
Payments for share buy-back
Proceeds from borrowings
Repayment of borrowings
Loans to joint ventures
Payment of dividends
Payment of dividends to non-controlling interests
Net cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at beginning of the financial year
Note
2017
$000s
2016
$000s
3.3
4.3
9
5.5
3.5
932,619
(826,962)
1,895
37,584
1,555
(7,401)
(37,756)
994,977
(829,006)
-
9,845
2,392
(6,071)
(46,327)
101,534
125,810
(81,655)
(533)
(8,226)
(2,695)
(43,738)
-
(1,181)
(755)
(93,109)
(45,674)
(69,800)
452,298
(314,000)
(500)
(67,446)
(432)
(26,805)
354,742
(343,749)
-
(71,591)
(764)
120
(88,167)
8,545
(822)
78,919
(8,031)
(238)
87,188
Cash and cash equivalents at the end of the financial year
86,642
78,919
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Navitas Limited Annual Report 2017 061
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2017
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 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
Profit for the year
Fair value movement in hedge instruments (after tax)
Net currency translation differences (after tax)
Total comprehensive income for the year
-
-
-
-
-
-
1,232
-
1,282
-
80,337
-
-
532
-
(41)
80,869
1,282
1,191
1,232
1,282
80,337
491
83,342
Dividend reinvestment plan
Employee share plan purchase
Share buy-back
Dividends paid
2,941
275
(69,800)
-
-
-
-
-
-
-
-
-
-
-
-
(70,387)
-
-
-
(432)
2,941
275
(69,800)
(70,819)
Balance at 30 June 2017
110,511
2,648
(731)
42,417
893
155,738
Total attributable to:
Non-controlling interests – 30 June 2016
Non-controlling interests – 30 June 2017
-
-
-
-
-
-
-
-
834
893
834
893
Owners of the parent entity – 30 June 2016
Owners of the parent entity – 30 June 2017
177,095
110,511
1,416
2,648
(2,013)
(731)
32,467
42,417
-
-
208,965
154,845
Nature and purpose of reserves is set out in note 1.6. The consolidated statement of changes in equity should be read in conjunction with the
accompanying notes.
062 Navitas Limited Annual Report 2017
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 2017 was authorised for issue in accordance with a resolution of directors
dated 31 July 2017.
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 1.6 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 prior financial 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 de-recognition 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 2014 financial year. Hedge accounting was applied to these contracts in accordance with the
provisions of AASB 139. During the prior 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 de-
designation of the existing interest rate swap contracts as hedging instruments and the crystallisation of existing hedge accounting
losses into profit or loss in the prior 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 de-designation of the Group’s existing hedging arrangement.
In the prior financial 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 was applied retrospectively and
had no impact on profit, net assets or cash flows in the 2015 financial year.
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.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 063
1
Basis of preparation (continued)
1.2 Changes to accounting policies (continued)
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
commences 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 continuing its assessment of 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.
The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group has non-
cancellable operating lease commitments of $480m as detailed in note 5.2.2.
Management is currently assessing the effects of applying the new standard on the Group’s financial statements and the extent to
which these commitments will result in the recognition of lease assets and liabilities for future lease payments and how this will affect
the Group’s profit and classification of cash flows.
The financial impact of the new standard will be dependent on the Group’s lease arrangements in place when the new standard is
effective, and the accounting approach adopted, however on adoption of the new standard the Group is currently estimating an
increase in reported earnings before interest, tax, depreciation and amortisation (EBITDA), offset by higher depreciation and interest
expense and a lower reported profit after tax.
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.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 064 Navitas Limited Annual Report 2017
1
Basis of preparation (continued)
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).
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.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 065
1
Basis of preparation (continued)
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.
1.6 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.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 066 Navitas Limited Annual Report 2017
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
Division:
The University Partnerships division delivers education programmes, via pathway colleges and managed
campuses, to students requiring a university education.
Careers & Industry Division, comprising:
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.
Geographical areas
The Group operates in the following geographical areas.
External Operating Revenue
2017
$000s
2016
$000s
Non Current Assets*
2016
$000s
2017
$000s
Australia
United Kingdom
Europe
Asia
Canada
United States
Rest of World
600,224
73,414
57,483
31,472
87,494
99,955
3,462
629,561
95,013
62,211
37,336
78,868
99,962
5,484
232,914
229,929
99,663
9,422
716
36,035
551
170,458
228,666
97,892
10,172
174
39,076
772
Total
* excludes deferred tax assets.
953,504
1,008,435
609,230
547,210
Operating revenue in the 2017 financial year of $953.5m has been unfavourably impacted by appreciation of the Australian Dollar
compared to the previous financial year. Using foreign exchange rates that applied in the 2016 financial year the Group would have
recorded $27.6m higher revenue, principally from United Kingdom ($19.9m higher revenue), Canadian and United States based operations.
In the prior year, operating revenue of $1,008.4m was favourably impacted by the depreciation of the Australian Dollar compared to the
2015 financial year. Using foreign exchange rates that applied in the 2015 financial year the Group would have recorded $25.0m lower
revenue in the 2016 financial year, principally from United Kingdom and United States based operations.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 067
2
Segment information (continued)
University
Partnerships
Careers and Industry
Corporate
Navitas Limited
SAE
PEP
Total
$000s
2017
20161
2017
2016
2017
20161
2017
2016
2017
2016
2017
2016
Revenue
Tuition services
525,576 583,743 185,861 189,769 173,451 165,042 359,312 354,811
-
-
884,888
938,554
Other services
48,553
51,668
14,801
13,053
941
576
15,742
13,629
4,321
4,584
68,616
69,881
Total segment
revenue
Interest revenue
Total revenue
Result
EBITDA*
Net gain on
disposal of
controlled entities
Depreciation
Amortisation
574,129 635,411 200,662 202,822 174,392 165,618 375,054 368,440
4,321
4,584
953,504 1,008,435
1,691
2,216
955,195 1,010,651
131,253 146,891
29,940
28,509
31,071
25,425
61,011
53,934 (37,216) (36,244)
155,048
164,581
-
-
-
-
-
-
-
- 14,263
-
14,263
-
(5,914)
(6,706)
(15,636)
(13,683)
(4,540)
(2,685)
(20,176)
(16,368)
(6,169)
(7,693)
(32,259)
(30,767)
(211)
(211)
-
-
(393)
(538)
(393)
(538)
-
-
(604)
(749)
EBIT^
125,128 139,974
14,304
14,826
26,138
22,202
40,442
37,028 (29,122) (43,937)
136,448
133,065
Net finance expense
Share of net profit/(loss) of joint ventures
Profit before income tax
Income tax expense
(5,778)
(3,998)
271
(974)
130,941
128,093
(50,072)
(37,330)
Profit for the year
* EBITDA = Earnings before impairment, taxes, depreciation, amortisation and non-operating gains or losses. EBITDA excludes the share of results of equity accounted investments in
joint ventures.
^ EBIT = Earnings before tax and net finance income
1 Effective 1 July 2016 the Group has amended its management reporting structures to move the English and Careers business from Professional and English Programs to University
Partnerships. The 30 June 2016 comparative has been adjusted accordingly where total revenue of $64.3m and EBITDA of $9.7m was reclassified.
80,869
90,763
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 068 Navitas Limited Annual Report 2017
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 STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 069
Note
2017
$000s
2016
$000s
7,469
6,214
4.3
4.1
32,259
604
32,863
30,767
749
31,516
58,645
56,866
341,922
22,302
357,769
23,602
364,224
381,371
2017
$000s
2016
$000s
80,869
90,763
32,259
604
29,956
(14,263)
180
164
1,624
(23,079)
(7,890)
14,232
(6,542)
1,429
(379)
(7,630)
30,767
749
10,032
-
52
28
974
(9,571)
(1,383)
240
4,998
(2,485)
(9,247)
9,893
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 leases
Employee benefits expense
Employee benefits
Post Employment benefits
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 year
Non-cash items
Depreciation
Amortisation
Lease incentives
Net gain on disposal of controlled entities
Net loss on disposal of property, plant and equipment
Net exchange loss
Share of undistributed losses of entities accounted for using the equity method
Decrease/(increase) in assets
Trade and other receivables
Prepayments and other assets
Deferred tax assets
Increase/(decrease) in liabilities
Trade and other payables
Deferred revenue
Current tax payable
Provisions
Net cash flows from operating activities
101,534
125,810
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 070 Navitas Limited Annual Report 2017
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
The major components of income tax expense are:
2017
$000s
2016
$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
(37,447)
70
(36,333)
(745)
Deferred income tax
Relating to the origination and reversal of temporary differences
(12,695)
(252)
Income tax reported in the statement of comprehensive income
(50,072)
(37,330)
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 071
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.
2017
$000s
2016
$000s
Accounting profit before tax
130,941
128,093
At the Group’s statutory income tax rate of 30%
(39,282)
(38,428)
Adjustments in respect of current income tax of previous years
Non-taxable gains on disposal of controlled entities
Other non-taxable items
Change in the carrying value of carry forward tax losses
Effect of local tax rates not at 30%
70
4,279
(100)
(8,942)
(6,097)
(745)
-
-
-
1,843
Income tax reported in the statement of comprehensive income
(50,072)
(37,330)
3.4.2 Recognised tax assets and liabilities
Note
2017
$000s
2016
$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
4,057
37,377
212
(37,756)
13,077
37,078
229
(46,327)
3,890
4,057
47,549
(12,695)
(1,595)
(643)
46,325
(252)
716
760
32,616
47,549
9,670
1,706
1,324
962
220
17,358
1,376
32,616
10,544
4,484
545
1,594
799
26,300
3,283
47,549
3.4.3
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 072 Navitas Limited Annual Report 2017
3
Financial performance (continued)
3.4 Taxation (continued)
3.4.3 Carry forward tax losses
At 30 June 2016 the Group had US Federal and State operating tax losses of $26.3m that had been incurred by the Group’s US
domiciled entities since inception. These losses are able to be utilised in years through to 2034 for both US federal and US state
purposes.
At 30 June 2017 the Group completed a review of the recoverability of these losses and considered that $8.942m of the asset balance
should be de-recognised. This assessment was made following recent significant restriction of US visa rules and the impact, in the
short term, on international student recruitment in to the US.
The remaining carry forward losses of $17.358m 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, and the
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 2016: 9.9 cents (2015: 10.1 cents)
Interim franked dividend for 2017: 9.4 cents (2016: 9.6 cents)
2017
$000s
2016
$000s
36,593
33,794
38,009
36,091
70,387
74,100
Value of shares issued in lieu of cash dividends, under the dividend reinvestment plan
(2,941)
(2,509)
Cash dividends paid in year
67,446
71,591
3.5.2 Unrecognised amounts
Dividends proposed and not recognised as a liability
Dividends on ordinary shares:
Final franked dividends for 2017: 10.1 cents (2016: 9.9 cents)
36,186
36,784
3.5.3 Franking credits
At balance date the value of franking credits available (at 30%) was $6.3m (2016: $13.7m).
3.6 Earnings per share
Net profit attributable to equity holders of the parent ($000s)
80,337
90,078
Weighted average number of ordinary shares for earnings per share (Number of shares)
363,868,255
375,582,803
2017
2016
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017
Navitas Limited Annual Report 2017 073
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)
Other (b)
Useful lives
Amortisation period and method used Not applicable
Internally generated/acquired
Recoverable amount testing
Indefinite
Acquired
Annually and where an indicator of
impairment exists.
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 STATEMENTS For the year ended 30 June 2017 074 Navitas Limited Annual Report 2017
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 2015
Acquisition of controlled entity
Disposal of controlled entities
Impact of foreign currency conversion
Balance at 1 July 2016
Acquisition of controlled entity
Disposal of controlled entities
Impact of foreign currency conversion
Goodwill
Brand
names
Other
Total
316,674
1,624
(7,179)
1,385
312,504
536
(2,086)
(1,152)
136,000
-
-
-
136,000
-
-
-
17,694
-
-
-
17,694
-
-
-
470,368
1,624
(7,179)
1,385
466,198
536
(2,086)
(1,152)
Balance at 30 June 2017
309,802
136,000
17,694
463,496
Accumulated amortisation and impairment losses
Balance at 1 July 2015
Amortisation expense
Disposal of controlled entities
Impact of foreign currency conversion
Balance at 1 July 2016
Amortisation expense
Impact of foreign currency conversion
Balance at 30 June 2017
Net book value
At 1 July 2015
At 1 July 2016
At 30 June 2017
(53,725)
-
7,179
857
(45,689)
-
409
(45,280)
-
-
-
-
-
-
-
-
(8,317)
(749)
-
-
(9,066)
(604)
-
(62,042)
(749)
7,179
857
(54,755)
(604)
409
(9,670)
(54,950)
262,949
136,000
9,377
408,326
266,815
136,000
8,628
411,443
264,522
136,000
8,024
408,546
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 STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 075
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.
There were no impairment losses recognised during the 2017 and 2016 financial years.
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)
2017
2016
SAE
PEP, English and Foundation Skills
PEP, ELICOS
Curtin College
Deakin College
Australian College of Applied Psychology
Griffith College
Multiple units without significant intangibles
152,414
31,944
13,689
13,089
11,738
10,804
9,980
20,864
153,160
31,944
13,689
13,089
11,738
10,804
9,980
22,411
264,522
266,815
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 076 Navitas Limited Annual Report 2017
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
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 detailed 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 2.0%.
• 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.
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 drop below its carrying amount if the discount rate increased by 20% or more.
• Long term growth rate - the recoverable amount of SAE intangible assets would only drop below its carrying amount if the
growth rate used was lower than 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 $136.0m has been assessed using the same methods and assumptions as the
related goodwill.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 077
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 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%.
• 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
11,473
78,224
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 STATEMENTS For the year ended 30 June 2017 078 Navitas Limited Annual Report 2017
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 prior 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.
Trade receivables
Allowance for doubtful debts
Accrued income
Other receivables
2017
$000s
2016
$000s
122,702
(7,146)
109,776
(5,254)
115,556
104,522
21,480
4,018
13,722
3,681
141,054
121,925
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 STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 079
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.
$000s
Gross carrying amount
Balance at 1 July 2015
Additions
Disposal of controlled entity
Disposals
Exchange differences
Balance at 1 July 2016
Additions
Disposal of controlled entity
Disposals
Exchange differences
Closing balance at 30 June 2017
Accumulated depreciation
Balance at 1 July 2015
Depreciation expense
Disposal of controlled entity
Disposals
Exchange differences
Balance at 1 July 2016
Depreciation expense
Disposal of controlled entity
Disposals
Exchange differences
Closing balance at 30 June 2017
Net book value
At 1 July 2015
At 1 July 2016
At 30 June 2017
4.3.1 Additions
Plant and
equipment
Leasehold
improvements
Total
87,720
15,066
(1,297)
(5,386)
(778)
95,325
9,573
(228)
(8,812)
(2,018)
93,840
(36,545)
(15,427)
1,094
4,678
1,447
(44,753)
(15,624)
166
8,010
798
(51,403)
51,175
50,572
42,437
112,075
47,565
-
(458)
1,792
160,974
66,858
-
(30,807)
(2,400)
194,625
(64,056)
(15,340)
-
318
(917)
(79,995)
(16,635)
-
30,695
1,401
199,795
62,631
(1,297)
(5,844)
1,014
256,299
76,431
(228)
(39,619)
(4,418)
288,465
(100,601)
(30,767)
1,094
4,996
530
(124,748)
(32,259)
166
38,705
2,199
(64,534)
(115,937)
48,019
80,979
99,194
131,551
130,091
172,528
During the year, the Group completed commercial fit outs of new leased premises in Sydney, Australia. These fit outs were partially
funded by lease incentives contributed by the landlord. During the year, $37.6m was received as lease incentive from the landlord,
$14.6m of which was received in relation to fit out recorded in the prior financial year.
During the prior financial year, the Group paid $24.4m in relation to lease fit outs of which $9.8m had been received from the landlord.
The remaining balance was received from the landlord during FY17.
Additions in the year ended 30 June 2017 include non-cash additions of $1.3m (2016: $17.7m). Prior year amounts include a make
good asset in respect of the leased premise above of $8.4m and accrued fit out costs in respect of work performed during June 2016
of $7.3m.
During the year, the Group entered into finance leases over certain assets, included within plant and equipment, with an original cost
of $25.6m and a net book value at 30 June 2017 of $24.2m. These assets were purchased as part of the fit out of the new leased
premises in Sydney, Australia. Leased assets are pledged as security for the related finance lease liabilities (see note 5.2).
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 080 Navitas Limited Annual Report 2017
4
Assets and liabilities (continued)
4.4
Investments accounted for using the equity method
The Group has the following investments that are accounted for using the equity method:
Name
Australian School of Applied Management (ASAM)
Edith Cowan College Pty Ltd (see note 9)
University of Canberra College Pty Limited
Western Sydney University International College Pty Ltd
Interest
2017
2016
30%
50%
50.1%
50%
-
-
50.1%
50%
ASAM is part of Navitas Ventures and provides leadership development programs and symposiums principally in Australia.
The other investments are joint ventures that provide University Partnerships educational services within Australia.
Summarised combined statement of financial position for these investments is set out below:
Current Assets
Non Current Assets
Current Liabilities
Non Current Liabilities
Equity
Navitas share at relevant ownership interest
Goodwill
Carrying amount of the investments accounted for using the equity method
Summarised combined statement of financial performance for these investments is as follows:
2017
$000s
2016
$000s
21,253
4,095
(27,188)
(1,899)
(3,739)
(1,643)
27,263
25,620
5,159
642
(6,548)
(135)
(882)
(441)
4,657
4,216
Operating revenue
EBITDA
Profit/(loss) after tax
2017
$000s
2016
$000s
2017
$000s
2016
$000s
Navitas share
32,441
14,023
16,221
7,012
2,714
(2,748)
1,357
(1,374)
541
(1,948)
271
(974)
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 081
4
Assets and liabilities (continued)
4.5 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 ary 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
2017
$000s
2016
$000s
10,519
111,683
5,552
22,916
113,528
3,196
127,754
139,640
50,906
23,555
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 082 Navitas Limited Annual Report 2017
4
Assets and liabilities (continued)
4.6 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’s make good provisions have decreased in the year due to the move to new leased offices 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
2017
$000s
2016
$000s
2,655
8,740
9,575
6,764
11,395
16,339
11,733
5,252
13,118
6,562
16,985
19,680
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 083
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 2017, the Group’s Australian operations held $41.7m (2016: $47.9m) 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.
Current
Secured
Finance lease liabilities
Non Current
Secured
Finance lease liabilities
Bank loans
Note
2017
$000s
2016
$000s
5.2.2
3,099
-
5.2.2
5.2.1
21,534
248,033
-
135,093
269,567
135,093
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 084 Navitas Limited Annual Report 2017
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
Credit facility amounts utilised comprise
Rental and Performance guarantees
Borrowings (drawn in Australian Dollars, Canadian Dollars, US Dollars and Singapore Dollars)
2017
$000s
2016
$000s
400,000
400,000
91,836
204,578
60,131
248,033
60,329
135,093
308,164
195,422
The borrowings of $248.033m (2016: $135.093m) include $118.658m (2016: $14.718m) at floating interest rates and $129.375m
(2016: $120.375m) 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 2.65% (2016: 3.03%). 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.
Finance leases – Group as lessee
During the year, the Group has entered into sale and lease arrangements related to the financing of the fit outs of the Elizabeth Street,
Sydney and other premises. Plant and equipment with a carrying value of $24.190m at 30 June 2017 has been leased back under these
finance arrangements and are held as security. The finance leases expire within 7 years.
Commitments in relation to finance leases are payable as follows:
Within one year
After one year but not more than five years
More than five years
Minimum lease payments
Future finance charges
Total finance lease liabilities
The present value of finance lease liabilities is as follows:
Within one year
After one year but not more than five years
More than five years
Minimum lease payments
2017
$000s
2016
$000s
4,073
16,292
8,147
28,512
(3,879)
24,633
3,099
13,755
7,779
24,633
-
-
-
-
-
-
-
-
-
-
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 085
5
Capital structure and financing (continued)
5.2 Borrowings (continued)
5.2.2 Leasing (continued)
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
2017
$000s
2016
$000s
57,538
193,335
229,489
58,112
195,443
243,240
480,362
496,795
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 2017 and 2016 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.
2017
$000s
2016
$000s
272,666
(86,642)
186,024
1,737,623
135,093
(78,919)
56,174
2,039,861
1,923,647
2,096,035
9.7%
2.7%
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 2017, the Group’s WACC was approximately 8% (2016: 8%). Returns on capital employed were 18.2% (2016: 21.6%) from continuing
operations; well above the Group’s WACC.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 086 Navitas Limited Annual Report 2017
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 2017.
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
Finance leases
Bank borrowings
Net exposure
Variable interest rate risk
Fixed interest rate risk
(after interest rate swaps)
2017
$000s
2016
$000s
2017
$000s
2016
$000s
86,642
78,919
-
-
-
118,658
-
14,718
24,633
129,375
-
120,375
(32,016)
64,201
(154,008)
(120,375)
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 0.6% to 3.0% (2016: 0.5% to 3.2%).
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.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 087
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 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 2017 the value of interest rate swap contracts held was
$131.506m (2016: $132.105m).
The following swaps are in place:
• Euro interest swaps at 0.71% maturing in February 2018.
• AUD interest swaps at 3.49% maturing in April 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
2017
$000s
2016
$000s
1,045
2,160
3,205
2,876
2,436
5,312
Interest rate swap contracts are exposed to fair value movements if interest rates change. Under these contracts the Group is
committed to $1.492m (2016: $1.496m) interest expense within 12 months and $1.055m (2016: $1.057m) interest expense between 1
year and 2 years, on $131.506m (2016: $132.105m) 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 2017, 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:
2017
$000s
2016
$000s
Judgements of reasonably possible movements
Post tax profit and equity higher/(lower) +1% (100 basis points)
(224)
449
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 STATEMENTS For the year ended 30 June 2017 088 Navitas Limited Annual Report 2017
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
The Group’s foreign currency risk policy is to only hedge known and committed exposures.
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.
The Group has a series of five year multi-currency bilateral revolving credit facilities for $400m. Of this facility $75m expires in
December 2019 and $325m expires in December 2020. These facilities are split into two tranches. Tranche A is $320m and wholly
consists of credit facilities, whereas Tranche B is $80m and is primarily for contingent instrument requirements.
A total of $308.164m (2016: $195.422m) had been utilised of the total facility, split between lease rental and performance guarantees
of $60.131m (2016: $60.329m) and borrowings of $248.033m (2016: $135.093m).
Cash flows from operations for 2017 were $101.534m (2016: $125.810m).
The Group’s policy is that no more than 50% of credit facilities should mature within the following 12 months. At 30 June 2017, none
(2016: none) of the Group’s credit facilities will mature within the following 12 months.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 089
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
2017
<3 months
$000s
3 months to a year
$000s
1 —5 years
$000s
>5 years
$000s
Total
$000s
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Finance lease liabilities
Bank loans
Cross currency basis swap
Interest rate derivatives
86,642
137,036
223,678
10,519
1,018
-
-
373
11,910
-
4,018
4,018
108,478
3,055
-
-
1,119
-
-
-
-
16,292
248,033
2,160
1,055
112,652
267,540
-
-
-
-
8,146
-
-
-
8,146
86,642
141,054
227,696
118,997
28,511
248,033
2,160
2,547
400,248
Net maturity
211,768
(108,634)
(267,540)
(8,146)
(172,552)
2016
<3 months
$000s
3 months to a year
$000s
1 —5 years
$000s
>5 years
$000s
Total
$000s
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Bank loans
Cross currency basis swap
Interest rate derivatives
78,919
118,244
197,163
22,916
-
-
374
-
3,681
3,681
108,216
-
-
1,122
-
-
-
-
135,093
2,730
1,057
23,290
109,338
138,880
Net maturity
173,873
(105,657)
(138,880)
-
-
-
-
-
-
-
-
-
78,919
121,925
200,844
131,132
135,093
2,730
2,553
271,508
(70,664)
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 2017. 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 2017, the Group had recognised deferred
revenue of $262.112m (2016: $272.707m), 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 2017, the Group had $248.033m of bank debt (2016: $135.093m) and unutilised credit facilities of $91.836m available (2016:
$204.578m). Management is confident this is sufficient to cover any liquidity risk exposure at 30 June 2017.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 090 Navitas Limited Annual Report 2017
5
Capital structure and financing (continued)
5.5
Issued Capital
Movements in shares on issue
2017
2016
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)
371,559,353
646,576
52,334
(13,985,478)
177,095
2,941
275
(69,800)
376,330,968
566,138
102,861
(5,440,614)
200,974
2,509
417
(26,805)
At 30 June
358,272,785
110,511
371,559,353
177,095
(i) Dividend reinvestment plan
During the year the Company issued 646,576 (2016: 566,138) shares to a value of $2.941m (2016: $2.509m) in lieu of cash dividends.
(ii) Employee share schemes
During the year the Company issued 21,744 (2016: 47,265) shares to executive employees (under the terms of the Executive Share
Plan) to a value of $0.114m (2016: $0.192m) in settlement of obligations arising from the Company’s ValueShare incentive scheme.
These obligations were previously recognised in the Company’s results for the 2016 and 2015 financial years. In addition, the
Company issued 30,590 (2016: 55,596) shares valued at $0.161m (2016: $0.225m) to eligible employees in lieu of salaries and wages
as part of the Company’s Employee Share Ownership Plan.
(iii) Share buy-back
During the financial year the Company continued the on-market buy-back, announced on 2 February 2016, of up to 7.5% of its ordinary
shares currently on issue as part of its ongoing capital management initiatives.
During the year, the Company has purchased and cancelled a total of 13,985,478 ordinary shares (2016: 5,440,614). The shares were
acquired at an average price of $4.99 (2016: $4.93) per share, with prices ranging from $4.06 to $5.34 (2016: $4.58 to $5.18). The
total cost of $69.800m (2016: $26.805m) was deducted from issued capital.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 Navitas Limited Annual Report 2017 091
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*
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*
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*
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*
International College of Manitoba Limited
SAE-Institute GmbH
Pursuant to ASIC Class Order 2016/785, 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;
except for Perth Institute of Business and Technology Pty Ltd, (now named Edith Cowan College Pty Ltd), which was removed by
revocation deed on 28 September 2016.
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 STATEMENTS For the year ended 30 June 2017 092 Navitas Limited Annual Report 2017
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
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
At 30 June
Closed Group
2017
$000s
2016
$000s
48,221
87,502
15,480
52,189
77,905
13,581
151,203
143,675
119,376
16,015
324,677
384,593
844,661
995,864
90,489
146,292
2,667
129,518
11,344
380,310
44,563
269,567
16,142
330,272
710,582
285,282
110,511
(413)
175,184
285,282
145,380
100,191
(70,387)
175,184
76,835
20,112
327,367
313,838
738,152
881,827
101,773
163,049
1,743
108,067
16,716
391,348
17,805
135,093
18,824
171,722
563,070
318,757
177,095
(3,718)
145,380
318,757
119,020
100,460
(74,100)
145,380
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017
Navitas Limited Annual Report 2017 093
Closed Group
2017
$000s
2016
$000s
613,096
661,089
(92,694)
(140,261)
(242,453)
(8,696)
(96,652)
(164,442)
(263,523)
(7,250)
128,992
129,222
(28,801)
(28,762)
100,191
100,460
193
1,831
(549)
1,475
-
(2,569)
771
(1,798)
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
Currency translation movements
Fair value movements in hedge instruments
Income tax relating to other comprehensive income
Other comprehensive income/(expense) for the year
Total comprehensive income for the year
101,666
98,662
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 094 Navitas Limited Annual Report 2017
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:
• 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 $67,144 (2016: $64,388) 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 $26,118 (2016: $43,080) 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 Ltd, a joint venture company, of
$1,300,000 (2016: $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 $49,202 (2016: $12,798) on the loan and
interest of $14,655 (2016: $8,208) is outstanding at 30 June 2017. The loan is outstanding at 30 June 2017 and has no set
repayment terms.
• Navitas Limited has charged service fees of $454,683 (2016: $38,363) and provided marketing, staff and other services totaling
$56,174 (2016: $143,150) to Western Sydney University International College Pty Ltd, a joint venture company, during the year. At
30 June 2017, an amount of $52,208 (2016: $52,483) is outstanding.
• Navitas Limited has charged service fees of $877,545 (2016: $1,288,415) and provided marketing, staff and other services totaling
$285,919 (2016: $117,353) to University of Canberra College Pty Limited, a joint venture company, during the year. At 30 June 2017,
an amount of $563,268 (2016: $70,988) is outstanding.
• University of Canberra College Pty Limited has provided marketing, staff and other services totaling $119,238 (2016: $nil) to
Navitas Limited and related entities during the year. At 30 June 2017, an amount of $23,820 (2016: $nil) is outstanding.
• Navitas Limited has charged service fees of $1,407,655 (2016: $nil) and provided staff and other services totaling $134,385 (2016:
$nil) to Edith Cowan College Pty Ltd, a joint venture company, during the year. At 30 June 2017, an amount of $243,368 (2016: $nil)
is outstanding.
• Edith Cowan College Pty Ltd has charged royalty fees to a subsidiary of Navitas Limited totaling $495,730 and has recharged staff
costs totaling $124,093 during the year. At 30 June 2017, an amount of $523,650 (2016: $nil) 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 pages 42 to 43. Aggregate compensation and
shareholdings are provided on pages 48 to 53.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017 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 services
Auditor of the Company
Deloitte Touche Tohmatsu (Australia)
Other – tax services
Other – consulting services
Overseas Deloitte Touche Tohmatsu firms
Other – consulting services
Navitas Limited Annual Report 2017 095
Parent
2017
$000s
2016
$000s
130,144
99,617
769,625
702,021
332,221
341,876
611,113
486,037
110,511
(2,244)
50,245
177,095
(3,718)
42,607
158,512
215,984
78,025
79,500
37,661
35,863
2017
$
2016
$
404,549
19,200
625,027
12,604
369,841
27,045
742,894
7,216
1,061,380
1,146,996
-
50,000
3,500
2,989
-
-
1,114,880
1,149,985
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017
096 Navitas Limited Annual Report 2017
7
Unrecognised Items
7.1 Guarantees
The Group has entered into lease rental guarantees with a face value of $26.456m (2016: $37.188m) and performance guarantees with a
face value of $81.089m (2016: $73.681m). 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.
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 2017
financial year. The total amount of dividend is $36.186m, which represents a fully franked dividend of 10.1 cents per share. The dividend
has not been provided for in the 30 June 2017 financial statements.
9
Changes in the Group’s Structure
Financial Year Ended 30 June 2017
(a) Conversion of Perth Institute of Business and Technology Pty Ltd into a joint venture
(i) Overview
In accordance with an agreement between Edith Cowan University (‘University’) and Perth Institute of Business and Technology
Pty Ltd (‘PIBT’), the University agreed to subscribe for shares in PIBT in consideration for the University entering into a continuing IP
Licence and Services Agreement with PIBT.
The agreement has resulted in the conversion of PIBT from being a wholly owned subsidiary of Navitas Limited into a joint venture,
jointly controlled and owned by Navitas Limited and the University, with effect from 1 October 2016.
As a result of this transaction, Navitas Limited has deconsolidated PIBT and subsequently recognised an investment in 50% of PIBT
at fair value at the date of disposal. This investment will subsequently be accounted for using the equity method. Navitas Limited has
recognised a non-cash gain of $17.263m on this transaction as detailed below.
On 4 October 2016, PIBT changed its name to Edith Cowan College Pty Ltd.
(ii) Carrying amount of PIBT’s assets and liabilities disposed
The carrying amounts of PIBT’s assets and liabilities disposed as at 30 September 2016 were as follows:
Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Deferred tax assets
Intangible assets
Total Assets
Liabilities
Trade and other payables
Deferred revenue
Other liabilities
Total Liabilities
Net Assets
$000s
8,226
2,182
291
356
2,086
13,141
1,729
7,107
685
9,521
3,620
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017
Navitas Limited Annual Report 2017 097
9
Changes in the Group’s Structure (continued)
Financial Year Ended 30 June 2017 (continued)
(a) Conversion of Perth Institute of Business and Technology Pty Ltd into a joint venture (continued)
(iii) Gain on conversion of PIBT into a joint venture
Fair value of investment retained in PIBT
Less: Carrying amount of net assets disposed
Net gain on disposal before income tax
$000s
20,883
(3,620)
17,263
The fair value of the investment retained in PIBT has been determined based on a valuation of PIBT as at 30 September 2016.
(iv) Cash flow impact
As a result of the transaction, Navitas Limited has effectively disposed of cash and cash equivalents of $8.226 million as detailed
above to cover the opening deferred revenue balance of the new joint venture.
(b) Disposal of Indian Student recruitment business and related legal entities
During the year, the Group agreed to dispose of its Indian student recruitment business (referred to as Study Overseas Global) and
related legal entities for consideration of $0.2 million. The Group has recorded a loss on disposal of $3.0 million.
Financial Year Ended 30 June 2016
In July 2015 the Group disposed of its 55% share in EduGlobal China for nil consideration.
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2017
098 Navitas Limited Annual Report 2017
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 2017 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 2017.
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 to the financial statements 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, 31 July 2017
Navitas Limited Annual Report 2017 099
100 Navitas Limited Annual Report 2017
Navitas Limited Annual Report 2017 101
102 Navitas Limited Annual Report 2017
Navitas Limited Annual Report 2017 103
104 Navitas Limited Annual Report 2017
ADDITIONAL INFORMATION
Additional information required by ASX and
not shown elsewhere in this annual report is
as follows. The information is current as at
31 August 2017.
Substantial shareholders
Substantial shareholders as disclosed in
substantial holding notices given to the
Company, were:
Shareholder
Mr Rodney M Jones
Schroder Investment
Management Australia
Limited
Dr Peter D Larsen
Allan Gray Australia Pty Ltd
AustralianSuper Pty Ltd
Shares
45,117,995
26,421,938
23,433,610
22,321,745
18,820,858
Voting Rights
The voting rights attached to shares as set
out in rule 16.2 of Navitas’ constitution
are the right to attend and vote at general
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 shareholding
Number of
shareholders
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001–and over
Total
2,012
1,987
466
326
69
4,860
As at 31 August 2017, there were 4,860
holders of Navitas shares, and a total
358,072,785 shares on issue.
There were 303 shareholders holding less
than a marketable parcel of shares based on
the market price on 31 August 2017 holding a
total of 6,764 shares.
No 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, has an
unlimited duration and is approximately
70% complete.
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 shares on the Company’s register as at 31 August 2017 were:
Rank
Name
Number of Shares % of Issued Capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Remjay Investments Pty Ltd
Citicorp Nominees Pty Limited
Landmark Holdings (WA) Pty Ltd
National Nominees Limited
Wonder Holdings Pty Ltd
Cambo Investments Pty Ltd
Hoperidge Enterprises Pty Ltd
BNP Paribas Nominees Pty Ltd
Coolah Holdings Pty Ltd
Mr Maxwell Charles Schroder
Ms Julianne Hannaford
Lily Investments Pty Ltd
Mrs Luniarty Kartosudiro
CS Third Nominees Pty Limited
Argo Investments Limited
Citicorp Nominees Pty Limited
Dasam Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
54,652,805
43,460,110
34,711,843
26,043,579
23,433,610
22,931,054
18,751,890
17,237,078
9,486,690
8,901,654
8,800,000
8,633,391
8,129,000
5,527,968
4,384,312
4,000,862
3,757,061
3,005,151
2,910,904
2,792,968
15.26
12.14
9.69
7.27
6.54
6.40
5.24
4.81
2.65
2.49
2.46
2.41
2.27
1.54
1.22
1.12
1.05
0.84
0.81
0.78
INVESTOR INFORMATION
Annual General Meeting
Change of address
Navitas Limited Annual Report 2017 105
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.
It is important that you notify the Share
registry immediately in writing if there is any
change to your registered address.
Lost holding statements
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.
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
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 15 November 2017 at
11.00am (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 6000
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.
106 Navitas Limited Annual Report 2017
GLOSSARY
ACAP
AMEP
ASIC
ASQA
ASX
Australian College of Applied Psychology
Adult Migrant English Program
Australian Securities and Investments Commission
Australian Skills Quality Authority
ASX Limited
ASX Listing Rules
The official listing rules of the ASX
BCUIC
Board
C&I
Constitution
Corporations Act
CRIC
CRICOS
Curtin College
Curtin Singapore
Deakin College
DIBP
Directors
DoET
EBITDA
ECC
EduGlobal
EFS
ELICOS
EPS
ESOS Act
EVA®
Eynesbury
FAU
FEE-HELP
FIC
Birmingham City University International College
The board of directors of Navitas
Careers and Industry Division
The constitution of the Company
Corporations Act 2001 (Cth)
Cambridge Ruskin International College Limited
Commonwealth Register of Institutions and Courses for Overseas Students
Colleges of Business and Technology Pty Ltd trading as Curtin College
Curtin University Singapore Campus
Melbourne Institute of Business and Technology Pty Ltd trading as Deakin College
Department of Immigration and Border Protection
Directors of Navitas
Department of Education and Training
Earnings before interest, taxation, depreciation, amortisation and goodwill impairment
Edith Cowan College
EduGlobal China Limited
English and Foundation Skills
English Language Intensive Courses for Overseas Students
Earnings per share
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
ICM
ICP
HIBT Limited trading as Hertfordshire International College
Health Skills Australia Pty Ltd
Humanitarian Settlement Services
International College of Manitoba
International College Portsmouth Limited
Navitas Limited Annual Report 2017 107
ICRGU
ICWS
KPI
LBIC
LTM
LTUSC
MOOC
Navitas or Company
Navitas at UNH
NV
NCPS
NPAT
NQF
pcp
PDIC
PEP
PY
RTO
SAE
SAIBT
SEE
Shareholder
Shares
SIBT
SOL
SPP
SSVF
International College Robert Gordon University
International College Wales Swansea Limited
Key Performance Indicator
London IBT Limited trading as LBIC
La Trobe Melbourne
La Trobe University Sydney Campus
Massive Open Online Courses
Navitas Limited ABN 69 109 613 309
Navitas at the University of New Hampshire
Navitas Ventures
Navitas College of Public Safety Pty Ltd
Net profit after tax
National Qualifications Framework
prior comparative period
Plymouth Devon International College Limited
Professional and English Programs
Professional Year
Registered training organisation
SAE Institute
South Australian Institute of Business and Technology
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
Simplified Student Visa Framework
StudyLink
Learning Information Systems Pty Ltd trading as StudyLink
TEQSA
TESOL
TVP
UCC
UCIC
UMass Boston
UMass Dartmouth
UMass Lowell
UNIC
UKBA
UPD
VET
VSL
WACC
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
VET Student Loans
Weighted average cost of capital
Western Sydney University International College
108 Navitas Limited Annual Report 2017
CORPORATE INFORMATION
Directors
Executive Directors
Mr Rod Jones
Non-Executive Directors
Ms Tracey Horton
Mr Tony Cipa
Mr Harvey Collins
Ms Diana Eilert
Mr James King
Ms Lisa Paul
Mr David Robb
Company Secretaries
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 2017 109
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
NAVC170419-1123 0917_AW