G8 updates on current trading and 2021 outlook, signals resumption of Greenfield program
G8 Education has released a statement providing an update on current trading, including occupancy and earnings performance, and further detail on intentions for 2021, including the Group’s key areas of focus which will feature the opening of ten new greenfield sites across the year.
In addition, detail was also provided about the launch of an Employee Payment Remediation Program to address payment irregularities identified in an internal review.
The details of the remediation program were released in a separate statement and are summarised here.
Group occupancy up to 75.5%, costs management solid, investment program continues
Current occupancy across G8’s network of around 470 centres has reached 75.5 per cent, around 6.5 per cent higher than 30 June 2020, and down 4.5 per cent compared to the same period last year.
The like for like fall of 4.5 per cent is an improvement on the 5.9 per cent shortfall reported in G8’s Half Year results.
The roll out of a new technology platform that forms part of the Group’s new rostering system has helped deliver wage efficiencies in line with targets set out at the beginning of the year, with material reductions in wage hours per booking reported compared to points in 2019 when occupancy levels were broadly equivalent.
That being said, fluctuations in wage hours per booking across 2020 have been exacerbated by lower relative occupancy levels, impacting negatively the booking component of the wage hours per booking calculation.
The Group’s re-engineered improvement program – in which all activities except for major asset refurbishments were continued despite the COVID-19-related environment – progressed in line with expectations, with approximately 100 centres being covered by the program in CY20
Overall, $31 million has been earmarked for investment programs in 2021.
$98 million of EBIT reported for first 11 months, debt refinance exercise progressing
G8 generated $98 million of underlying earnings before interest and tax (EBIT) in the eleven months ended November 2020, a number that includes the current year employment costs relating to the employee payment remediation program.
Net debt levels (total debt less total cash) have now moved to more or less cash neutral levels providing a solid platform for the refinancing of one tranche of debt. The restructuring of G8’s term debt is on track and expected to be completed in early CY21.
G8 commits to increasing investment in centres and launching greenfield pipeline
Looking ahead to 2021 G8 have confirmed that they will focus efforts on three main strategic areas namely:
- the optimisation of the portfolio involving the divestment of previously impaired centres;
- the continuation of the improvement program; and
- the measured roll-out of new greenfield centres using the revised investment model.
To drive earnings growth in the medium-term, the Group has committed to increasing the pace of its improvement program which has been justified by the positive results flowing from the program to date.
In addition, 10 new greenfield centres are expected to open in 2021 with a capital outlay of approximately $4 million, or around $0.4 million per centre.
Overall, $10 million in capital expenditure deferred from CY20 will be released in CY21, taking estimated CY21 capital expenditure to at least $50 million, with further incremental spending based on return hurdles.
Gary Carroll, CEO and Managing Director said, “Progress in our strategic focus areas has been pleasing. Together with our significantly strengthened balance sheet, this provides the group with confidence to increase the pace in our strategic focus areas as they will deliver significant benefits in the medium term. The program costs in 2021 will be carefully managed to ensure they do not result in a material drag to earnings in the near term.”
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