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Investing for Success NAVITAS LIMITED ANNUAL REPORT 2014 “Studying at LBIC gave me an excellent start to my studies in the UK and built my confidence in preparation for my studies at Brunel.” Ammar Abbasi Pakistan ii Investing for Success Navitas Limited Annual Report 2014 Contents Operating and Financial Report 2 Navitas’ Global Footprint – Colleges, Campuses and Offices 5 Highlights and Achievements 6 Board of Directors 8 Navitas Leadership Team 12 Chairman and Group Chief Executive Officer Report 16 Chief Financial Officer’s Report 20 Review of Operations 25 Strategy and Corporate Responsibility 32 ValueShare Incentive Scheme 38 Corporate Governance Statement 41 Financial Statements 55 Consolidated Statement of Profit or Comprehensive Income 56 Consolidated Statement of Financial Position 57 Consolidated Statement of Changes in Equity 58 Consolidated Statement of Cash Flows 59 Notes to the Financial Statements 60 Directors’ Report 109 Additional Information 130 Investor Information 132 Glossary 133 Corporate Information 136 Operating and Financial Report Navitas exists to foster relationships and provide people around the world with the opportunity to realise their ambitions through lifelong education and training. We do this by anticipating the world’s learning needs, creating and delivering a comprehensive range of education options and equipping people with essential skills and experiences. At Navitas, we are investing for success. Vision Values To be recognised universally We have conviction to our as one of the most trusted purpose and potential. learning organisations. We demonstrate drive by achieving and advancing together. Mission We are adventurous in mind Navitas is passionate about and spirit. creating opportunities through We demonstrate rigour in lifelong learning and being a enhancing our professional global leader in delivering reputation and credibility. better learning solutions. We are genuine in the way we behave and deliver. We show respect by celebrating, valuing and caring for people At Navitas and the environment. we are investing for success 2 Investing for Success Navitas Limited Annual Report 2014 Europe Amsterdam, Athens, Belgrade, Barcelona, Berlin, Bochum, Brussels, Bucharest, Cologne, Frankfurt, Geneva, Hamburg, Istanbul, Leipzig, Ljubljana, Madrid, Milan, Munich, Paris, Rotterdam, Stockholm, Stuttgart, Vienna, Zurich United Kingdom Aberdeen, Birmingham, Cambridge, Edinburgh, Glasgow, Hertfordshire, Liverpool, London, Oxford, Plymouth, Portsmouth, Swansea Colleges and Campuses (Region) Colleges and Campuses (City) Offshore Marketing Offices (Region) Colombia, China, India, Japan, Kenya, Middle East, Nigeria, Pakistan, Russia, South Korea, Turkey, UK, Vietnam Offshore Marketing Offices (City) Beijing, Beyoglu, Dubai, Guangzhou, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Lagos, Lahore, London, Manizales, Moscow, Nairobi, New Delhi, Seoul, Shanghai, Taipei, Tokyo “ With over 110 colleges and campuses across the globe and 80,000 students currently studying with us, we understand the world’s learning needs.” Africa Cape Town, Nairobi 3 Investing for Success Navitas Limited Annual Report 2014 South East Asia Bangkok, Jakarta, Kuala Lumpur, Singapore Middle East Amman, Dubai, Sri Lanka Jeddah, Qatar Colombo India Chennai, Bangalore, Bangladesh Mumbai Dhaka Australia/New Zealand Adelaide, Brisbane, Christchurch, Darwin, Melbourne, Newcastle, Perth, Sydney, Auckland North America Atlanta, Boston, Bowling Green, Chicago, Dartmouth, Durham, Los Angeles, Lowell, Miami, Nashville, New York, San Francisco, Vancouver, Winnipeg Mexico Inicio Navitas’ Global Footprint – Colleges, Campuses and Offices Navitas offers an extensive range of educational services via more than 110 colleges and campuses across its global network. More information about education opportunities at these locations is available at navitas.com. Investing for Success Navitas Limited Annual Report 2014 5 Highlights and Achievements Key Highlights Navitas enters the ASX100 * Navitas ranked 25th in Forbes 20% 11% 2014 World’s 100 Most innovative Group Revenue EBiTDA Growth Companies list $878.2 million $144.9 million Continued student enrolment growth across University Programs produces record result * Opened two new University 10% 25% Programs Colleges, one in the UK and one in New Zealand Net profit after tax Wealth Distributed $82.0 million $664.0 million Added significant systems and management capability in SAE resulting in increased student enrolments and strong revenue growth 11% 31% Record year for Professional and English Programs with continued Operating cash flow Underlying net growth in education businesses $140.9 million profit after tax and government contracts *excluding goodwill impairment $51.6 million Corporate Responsibility Diversity – Management Diversity – Board Wealth Distributed ($m) 63.6 FY10 418.6 14.3 41.5 F Y11 474.2 FY12 498.1 58.5 FY13 529.5 36.4 85.7 FY14 664.0 Staff Management Male Male Male Female Female Female Volunteer hours Donations ($000) Wealth Distributed 93 10 740 832 5 30 11 Hrs 20 23 2,600 1,700 Teaching and academic employees ABCN Scholarships University and consortium partners Other Fundraising Other employees Management Shareholders — dividends Governments — income taxes Reinvested as depreciation, 6 Investing for Success Navitas Limited Annual Report 2014 amortisation and retained earnings Financial Summary 2014 2013 2012 2 011 2010 2009 2008 % Change $000s $000s $000s $000s $000s $000s $000s 14/13 Revenues 878,219 731,734 688,530 643,812 556,743 470,696 345,438 20% EBITDA* 144,929 130,002 126,817 121,144 96,700 77,059 63,443 11% Profit attributable to members of Navitas* 82,032 74,575 73,149 77,392 64,251 49,191 37,430 10% Basic earnings per Share (cents)* 21.8 19.9 19.5 21.7 18.8 14.3 10.8 10% Interim dividend per Share (cents) 9.4 9.3 9.4 8.7 8.1 5.5 4.7 1% (fully franked) Final dividend per Share (cents) 10.1 10.2 10.1 12.0 10.7 8.8 6.2 -1% EVA created 51,779 46,602 38,524 58,630 54,573 40,551 27,288 11% Operating cashflows 140,939 126,819 73,859 69,458 86,504 104,344 78,609 11% Total equity 211,709 235,747 233,560 239,213 103,446 98,576 93,980 -10% Return on capital employed 19.9% 19.0% 19.4% 50.0% 60.0% 47.3% 33.6% 5% Revenue ($m) EBiTDA ($m) NPAT ($m) FY10 556.7 FY10 96.7 FY10 64.3 F Y11 641.8 F Y11 121.1 F Y11 77.4 FY12 688.5 FY12 126.8 FY12 73.1 FY13 731.7 FY13 130.0 FY13 74.6 FY14 878.2 FY14 144.9* FY14 82.0* Revenue Distribution 6 5 6 4 6 Australia 6 UK 7 6 Europe 7 9 Canada USA 67 ROW 71 FY14 – $878.2m FY13 – $731.7m *excluding goodwill impairment Investing for Success Navitas Limited Annual Report 2014 7 Board of Directors Pictured left to right: Ted Evans, James King, Harvey Collins, Tracey Horton, Rod Jones, Dr Peter Larsen, Tony Cipa. “ The business fundamentals of Navitas remain very robust with the negative working capital model, increasing cash flows, low debt, long term debt facilities and a significant base of enrolments carrying it through the medium term.” 8 Investing for Success Navitas Limited Annual Report 2014 Harvey Collins Rod Jones Tony Cipa BBus, FCPA, SFFin, FAICD BComm, DEd (Hon) ECowan, MAICD BBus, Grad Dip Accounting, CPA Non-Executive Chairman Group Chief Executive Officer Non-Executive Director and Managing Director Appointed 9 November 2004 Appointed 1 May 2014 Appointed 18 June 2004 Mr Collins has extensive executive and board Mr Cipa has extensive international business experience in a range of industries. From Mr Jones has 30 years experience in and finance experience including his roles 1986 to 1996 he held senior management educational administration and has held as CFO and Executive Finance Director roles in Western Australian regional bank, a number of senior administrative positions for CSL, the ASX listed international Challenge Bank Limited, including five years within the Government and the private biopharmaceutical company. as Chief Financial Officer. From 1997 to education sectors. His background covers During his time leading the finance function 2002, he was an executive director of listed both secondary and university education of CSL the company grew from a previously investment company, Chieftain Securities including being Deputy Director of the government owned business to a global Limited. From May 2009 to September 2012, Tertiary Institutions Service Centre and market leader with over 20 international he was the non-executive Chairman of Bank the Secondary Education Authority in locations including the USA, UK, Canada of Western Australia Limited (Bankwest). Western Australia. and Germany. Mr Cipa was CFO from 1994 From February 2004 to 30 June 2013, he Mr Jones has been involved in international to 2000 then served as Executive Finance was a Non-Executive director (Deputy education since 1987 and is recognised Director on CSL’s Board of Directors from Chairman) of Verve Energy (Electricity as one of the leaders in the successful 2000 to 2010. Generation Corporation). Mr Collins has held establishment of the sector in Australia. board appointments in industries as diverse He is one of the co-founders of Navitas and Mr Cipa is currently the Chairman of as financial services, health insurance, has been instrumental in the expansion and the Audit and Risk Committee and a telecommunications, equipment hire, mining development of the Navitas model into the Non-Executive Director of ASX listed Skilled services, franchising and electricity. He is a various markets which it now operates. Group. He is also a Non-Executive Director past member of the WA State Council of the at Mansfield District Hospital. Australian Institute of Company Directors In April 2007, Mr Jones received an honorary and has recently been appointed to the ASIC Doctor of Education from Edith Cowan During the past three years Mr Cipa has Directors Advisory Panel. University in recognition of his outstanding served as a director of the following other contribution to the development of the listed companies: During the past three years, Mr Collins international education sector both in • Skilled Group* (from 4 April 2011) has not served as a director of any other Australia and overseas, and in 2008 was listed companies.