Mayfield positive on 2021, resumes dividend payments, establishes greenfield portfolio

Victoria focussed early childhood education and care (ECEC) provider Mayfield Childcare Ltd has released its Full Year 2020 results, in which the group sounded an optimistic note as it confirmed the resumption of dividend payments and highlighted its wider growth aspirations going forward. 

 

“With a strong balance sheet and facilities at hand, Mayfield Childcare is actively exploring acquisition opportunities across the Victorian, South Australian and New South Wales markets,” Dean Clarke, Mayfield CEO said.

 

“In addition, we are establishing a base of greenfield developments within Victoria that meet stringent performance metrics, and acceptable development timelines.”

 

The move into the greenfield space is a new development for Mayfield, which has traditionally not been particularly acquisitive, although in last year’s results the Group did signal they were exploring a significant acquisition opportunity which did not proceed due to COVID-19. 

 

Mayfield currently has a long day care network of 20 services with an available acquisition line of credit amounting to $3.5 million. They also have around $1.5 million of cash on their balance sheet. 

 

Board reverses no 2020 dividend decision, elects to pay 2.00 cents per share instead

 

In a surprise move, the Board of Directors have agreed to reverse its decision not to declare or pay a dividend in respect of CY2020 and instead have decided to provide shareholders with a fully franked dividend of 2.00 cents per share payable in March 2021. 

 

The decision is the first such move by a listed ECEC provider since COVID-19, with G8 Education Ltd suspending its CY2020 dividend, Think Childcare Ltd suspending its HY2020 dividend and Evolve Education Group also committing to no dividends in CY2020.

 

The proposed CY2020 dividend of 2.00 cents a share is around 70 per cent lower than the dividend of 7.71 cents a share paid for the CY2019 period. 

 

CY2020 financial performance supported by COVID-19 relief payments

 

Underlying revenue in CY2020 was $25.1 million, a 31.1 per cent reduction compared to CY2019 due to COVID-19 disruptions, but after receipt of around $12.4 million in ECEC Relief Package and JobKeeper proceeds, overall revenues increased to $37.1 million, 3.6 per cent higher than last year. 

 

Notably, centre earnings before interest, tax, depreciation and amortisation (EBITDA) was 12.6 per cent higher in CY2020 rising to $9.3 million as cost increases, including labour, were kept in check relative to the same period last year. 

 

That being said there was a 17 per cent increase in support office costs recorded in the period which tempered the group EBITDA percentage increase over last year to 10.9 per cent with EBITDA margins of 25.0 per cent. 

 

Occupancy levels fall year on year across network, fees to rise in July 2021

 

Mayfield reported occupancy of 67.2 per cent in CY2020 across its network down from 69.5 per cent in 2019.

 

The fall in performance has been attributed to the reduction in occupancy caused by the breadth and duration of the Victorian Stage 4 restrictions imposed in the traditionally stronger occupancy growth period of the second half of the calendar year. 

 

The company confirmed in its outlook statement that occupancy is currently tracking at pre-COVID-19 levels and also signalled that it will take its next “moderate” price increase in July 2021 which will be the first such increase in two years. 

 

Balance sheet strengthened in CY2020 as debt paid down and cash preserved

 

From a balance sheet perspective Mayfield took a cautious approach to management in CY2020 directing $2.9 million of free cash flow to pay down bank debt which was sitting around $12.8 million in CY2019 and is now around $9.9 million.  

 

This was made possible by a strong operating cash flow performance with over $10 million in net operating cash recorded in the year, a record for the company. 

 

Net debt is currently $8.4 million placing the company on a net debt / EBITDA multiple of 1.24x and debt to equity percentage of 32 per cent. 

 

To review this year’s Results presentation please click here.