Evolve releases interim results, raises A$35m in bond issue, positions for acquisition phase
Evolve Education Group have released their interim financial results in which they report an underlying profit in line with guidance, and separately confirm the raising of A$35.0 million (NZ$36.8 million) through the issue of a tranche of medium term notes.
For the six months period ended 30 September 2020 the Group generated revenues of NZ$65.3 million (A$62.1 million), a six per cent fall on the same period last year, however they reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of NZ$12.4 million (A$11.8 million) up substantially compared to the NZ$3.9 million (A$3.7 million) reported for the same period last year.
The improved financial performance despite COVID-19 related disruptions was made possible by the combination of Government support initiatives over the period, operational improvements and efficiencies achieved both at centre and support office level and contributions from the ten Australian centres acquired in calendar year 2019.
Commenting on the news Chris Scott, Managing Director said “The “green shoots” seen in the New Zealand operations, the performance of the Australian centres and a stronger overall financial position provide a firm platform for Evolve to recommence its acquisition activities.”
Dip in revenues compensated by effective cost management and streamlining initiatives
Group revenues for the six month period fell by 6 per cent to NZ$65.3 million (A$62.0 million) with the contribution from the ten Australian centres helping to mitigate a 19 per cent fall in revenues across the New Zealand centre network.
Government related funding receipts increased to 75.0 per cent of total revenues in the six month period, compared to 65 per cent in 2019, as both the New Zealand and Australian Governments stepped in to support their respective early childhood education and care sectors amidst the COVID-19 pandemic.
From a cost perspective the Group was able to implement effective cost management and streamlining initiatives, some of which were outlined as part of a turnaround strategy announced at the Group’s interim results in December 2019, yielding improvements in the costs profile across the business.
Overall Group operating expenses came in 20 per cent lower at NZ$52.3 million (A$49.7 million) in 2020 compared to NZ$65.3 million (A$62.0 million) last year, even after including NZ$5.2 million ($4.9 million) of additional costs from the Australian centre network which was purchased in late 2019, which in turn helped underlying EBITDA margins rise to 19.0 per cent, from 5.5 per cent and cash flow from operating activities rise to NZ$13.7 million (A$13.0 million).
Underlying EBITDA of NZ$12.4 million (A$11.8 million) was in line with guidance provided at the Group’s shareholder update released on 9 November 2020, in which the company committed to generating between NZ$14.4 million (A$13.7 million) and NZ$14.8 million (A$14.1 million) of EBITDA for the nine month period between January to September 2020.
Group raises A$35m via medium term note issuance, balance sheet looks sound
Evolve also confirmed that it had successfully placed A$35.0 million (NZ$36.8 million) in senior secured Australian five year notes at a coupon of 7.5 per cent in a wholesale offering.
This is the first transaction of its type for Evolve and will see the proceeds used to repay its existing secured debt of NZ$17.6 million (A$16.7 million) as well as provide funding for its acquisition strategy in Australia and for general corporate purposes.
Post this transaction and the repayment of bank debt the Group will see their current cash balances of around NZ$39 million (A$37.1 million) rise to around NZ$58.6 million (A$55.6 million) after the repayment of debt with the Group now having net cash, after debt commitments of NZ$23.6 million (A$22.4 million).