Mayfield strikes optimistic note for 2020 in 2019 Full Year results

Victoria focussed early childhood education and care (ECEC) provider Mayfield Childcare Ltd has released its Full Year 2019 results, which sounded a note of optimism on operating conditions as new supply in Mayfield’s catchments start to ease, and the benefits of the child care subsidy (CCS) system continue to stimulate demand, albeit at a more gradual pace.

Commenting Dean Clarke, Mayfield CEO said “From Mayfield’s perspective the sector challenges of the past few years are moderating. Supply in Victoria for the most part eased throughout 2019, with reduced supply growth evident in the geographical areas in which Mayfield operates.”

The company, which has historically focussed on operations in Victoria, also signalled that securing new acquisition opportunities in the region was proving challenging, and that the business, in a departure from previous strategy, was now considering expansion into other states should the right cluster of centres become available.

Mayfield currently owns and operates 21 centres with an average size of 84 licensed places.

Steady centre performance drives improved financial performance

Occupancy across the Group’s portfolio rose 0.50 per cent to 69.50 per cent in 2019, an increase that was tempered by weaker than expected performances from centres located in the western suburbs of Melbourne.

That being said revenue was up 14 per cent, a position which was helped by the positive occupancy performance, a fee increase of 3.9 per cent, and one acquisition made during the year.

Centre based wages as a percentage of revenue were 56.3 per cent, slightly lower than last year’s 56.4 per cent, and facilities expenses as a percentage of revenue came in at 13.8 per cent, also slightly lower than last year's 13.9 per cent.

The Group reported a 13 per cent increase in underlying earnings before interest and tax (EBIT) of $5.7 million, and a 12 per cent increase in underlying net profit of $3.8 million.

A dividend of 7.71 cents per share was announced.

90 per cent of organic portfolio now rated meeting or exceeding with ongoing quality focus

Of the 20 centres that represent the organic portfolio (ie: those acquired pre 2019), 90.0 per cent (18 centres) are rated either meeting or exceeding the National Quality Standard compared to 85.0 per cent (17 centres) at the same point last year.

The single acquisition that was made in 2019 was a working towards centre bringing the overall percentage of centres rated meeting or exceeding to 85.7 per cent.

The company noted that their quality improvement program, that focuses on centre presentation, educator development and educational program, continues to add value and will remain a key area of focus in 2020.

Single acquisition in 2019 but appetite for growth in or outside of Victoria signalled

A single 76 license place centre generating $0.12 million in EBITDA was purchased in 2019 for a total consideration of $0.9 million.

Overall a note of frustration was expressed by management at the lack of quality opportunities available in the Victorian market, with current centres for sale being either too small, overpriced or too regionally based to merit pursuing.

In addition, management confirmed that they were currently pursuing a ‘significant acquisition opportunity’ although it was unclear at this stage if acceptable terms would be agreed to and, as previously noted, that they would going forward start to consider opportunities outside of the state of Victoria.

To read Mayfield’s 2019 Fully Year results presentation please click here.