G8 Education reports steady HY2020 results despite COVID-19 impact on operations
G8 Education Ltd has reported a steady performance in their first half 2020 results amidst a period impacted heavily by the COVID-19 outbreak and subsequent emergency policy measures introduced by the Federal Government to mitigate the disruption the pandemic caused.
The company reported sales of $309 million and earnings before interest and tax (EBIT) of $29 million in the period, both of which were significantly lower than last year but nevertheless positive outcomes in an environment where participation in the ECEC Relief Package saw revenues capped at 50 per cent of late February levels and employment guarantees built into the package restricted more forthright cost reductions.
Commenting on the results Gary Carroll, CEO said “Whilst G8 had a strong start to 2020, the impact of COVID-19 on the economy, the sector and our families has been significant. I have been immensely proud of our team who have shown incredible commitment and resilience. As a result of their efforts, we have been able to provide continuity of care to our families and our communities through a highly challenging period.”
Swift COVID-19 operational response resonates with families: 91% give positive feedback
As part of the G8 response to the COVID-19 pandemic a comprehensive operational and business continuity plan was launched to ensure the health and safety of their families and teams, as well as safeguarding the business through prudent financial management.
The key areas of focus of the plan were in centre protocols designed to promote infection control, hygiene practices and social distancing in day to day operations, extensive support structures for families and team members as well as remote learning and on-line resource initiatives such as G8’s “At home” series and “Community Cubby.”
The results of the operational response from a family engagement perspective were positive, with 91 per cent of families participating in their COVID-19 Family Survey signalling that G8 had met or exceed their expectations over the outbreak period.
Like for like occupancy tracking behind last year with ACT the most impacted state
Occupancy across the Group in the period was down 5.9 per cent on a like for like basis as parents withdrew their children from care due to employment changes, working from home dynamics or safety concerns.
The ACT was the most significantly hit with occupancy down 15.1 per cent like for like across the Group’s ten centres in the Territory.
Across the states in which G8 has a larger exposure, New South Wales, its largest with 186 centres, was down 5.8 per cent, Victoria, with 140 centres was down 6.4 per cent and Queensland in which G8 has 72 centres, was down 4.2 per cent year on year.
Notably the company did confirm that post June 30 occupancy has continued to grow steadily, and as at the reporting date (and including Victoria which remains in lockdown), occupancy had reached 69 per cent with around 27 per cent of enrolled children not attending.
Balance sheet strong as cash flow remains positive and capital raise cash preserved
As at the half year point G8 reported a cash balance of $237.5 million compared to just $40.6 million at the same point last year.
The robust liquidity position was a function of the Group managing to generate positive net cash flow of $2.0 million from operating and investing activities in the period, which compares favourably with the $16.4 million outflow in H1 2019, enabling them to preserve the balance of new capital raised in May 2020, around $301 million that wasn’t used to pay down debt.
That being said, borrowings were $293.9 million at period end, down from $387.8 million in June 2019 and gearing down to just 5.3 per cent.
Singapore owned centres to be sold 10 years after acquired
The company also confirmed that a share sale agreement to divest the Singapore portfolio of centres has been entered into, and that the transaction is expected to complete, pending satisfaction of conditions precedent, including regulatory approvals and the conversion of certain franchised business to company owned, in 2h 2020.
The move comes nearly 10 years after G8 entered Singapore with the acquisition of Cherie Hearts’ portfolio of owned and franchised centres.
In addition to confirming the intention to sell the Singapore network, G8 confirmed that three centres in Australia had been closed with statutory losses of c $0.5 million and that four new greenfield sites had been opened and that the greenfield pipeline was now complete.