Undertaking a rationalisation program and creating a strong foundation: Navitas Limited’s (ASX: NVT) stock fell 3.6% on July 18, 2018 after the company announced its plan to undertake a rationalisation program to address the profitability of parts of its portfolio of the Careers and Industry Division and to form a strong foundation for growth in the Division. As a result, a number of one-off charges of total approximately $130m post tax will be included in the Company’s 2018 financial year result. However, NVT’s unaudited FY18 EBITDA result prior to these one-off charges are in line with market expectations. Further, an additional $8m of ‘teach out’ costs are expected to be incurred in FY19 and $5m in FY20, which is subject to the Company’s ability to find alternative providers. The ongoing businesses affected by this rationalisation will incur operating cash costs for the onerous leases and teaching costs until closure or divestment. An incremental cash impact of the FY18 charges of approximately $5m will come in FY19. Moreover, the company has undertaken the review of Careers and Industry Division, which determined that certain businesses within the division were expected to remain as either subscale or with limited opportunities for profitable returns. NVT has been working closely with the relevant US regulators since entering the US, and has gained accreditation for some courses, a range of recent regulatory constraints on ‘for profit’ providers in the US that have prevented the ability to operate profitably and expand accredited programs in the SAE US businesses for the last two years. These constraints are expected to continue over the foreseeable future. Meanwhile, NVT stock has fallen 3.86% in three months as on July 17, 2018.
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