G8 Education closes out 2020 in solid shape, positions conservatively for 2021
The Sector > Provider > Reporting > G8 Education closes out 2020 in solid shape, positions conservatively for 2021

G8 Education closes out 2020 in solid shape, positions conservatively for 2021

by Jason Roberts

February 23, 2021

G8 Education Ltd have released their Full Year 2020 results in which the Group reported profit growth broadly in line with expectations, a strong closing year financial position and a conservative outlook as it positions for a “recovery year” in 2021. 


G8 CEO and Managing Director Gary Carroll said, “This year the Group’s absolute priority has been to ensure the health, safety and wellbeing of our team members, children and families as we navigate the ongoing impact of COVID‐19.”


“In addition, we have been firmly focused on safeguarding the business through prudent financial management and cash preservation and by drawing on the Commonwealth Government’s welcome support for the sector during the pandemic.”


Revenue and profits impacted by COVID-19 with Government support softening blow 


The Group reported total revenues of $788.1 million in 2020, of which around $160.3 million, 20.3 per cent, was in the form of Federal Government COVID-19 support including the ECEC Relief Package, Transition Payment and Recovery Payment Packages. 


Total revenues, including the support packages, were around 14.9 per cent lower than 2019 reflecting the significant impact that COVID-19 had on operations in the period. 


Gross wages in the period, including $12.0 million relating to the employee payment remediation program, were $525.8 million, down 5.7 per cent on last year, however after accounting for around $102.8 million of net Job Keeper receipts, reported wages for 2020 came in at $423.0 million. 


G8 confirmed their adherence to the Employment Guarantees implicit in the relief package participation criteria and also highlighted that the Group had reinvested any residual support package proceeds into centre quality, including educational resources. 


Underlying earnings before interest and tax (EBIT) for CY2020 came in at $105.2 million, down 11.9 per cent on last year, although underlying EBIT margins, due largely to Government Support receipts, firmed slightly to 13.3 per cent. 


Occupancy falls in 2020, with 2021 occupancy tracking behind last year and 2019


Like for like occupancy across the Group’s network of 472 centres was 69.2 per cent in 2020, down 5.9 per cent compared to 2019 with the largest state and territory negative contributions coming from the ACT which was down 15.7 cent across its nine centres, and Victoria which was down 7.7 per cent across 141 centres. 


The ACT performance was impacted by higher than normal centre manager and team turnover combined with the COVID-19 challenges, and Victoria was impacted by the extended mobility restrictions imposed after the third lockdown in Q4 as well as COVID-19 related challenges from earlier in the year. 


As at February 2021 occupancy was confirmed to be tracking at 4.0 per cent below the same point in 2019 which is being used as a comparator due to COVID-19 impacts. 


Relative to last year no guidance was provided by the company but using occupancy graphs within the presentation it is possible to infer that occupancy in February 2021 this year is lagging February last year by around 1.00 per cent to 1.25 per cent. 


Quality pushes higher again in 2020 and remains priority in updated Corporate Strategy


The percentage of centres rated meeting or exceeding the National Quality Standards rose to 85 per cent as at the end of 2020, compared to 81 per cent in 2019, a rise of four percentage points.


The focus on quality will remain a key focus of the Group with a new set of Strategic Objectives including quality with a target of 95 per cent of centres reaching meeting and exceeding, alongside occupancy, being key measures in the new ‘Deliver Operational Excellence’ pillar.


The strategy recalibration has been prompted by a recognition that G8’s overall position has evolved materially since the formulation of the initial strategy in 2017 and with that evolution a new medium term strategy was required. 


The updated strategy includes five strategic objectives, compared to four previously, namely; fulfill children’s learning potential, support and build the team, deliver operational excellence, drive profitable growth and create differentiation. 


In addition, to recalibrating strategy the Group has updated its purpose to ‘Creating the foundations for learning in life’ and vision to “to be a best in class early childhood educator that’s the first choice for parents to care for their child.”


Group financial position is sound heading into 2021, no dividend for 2020 confirmed


As at 31 December 2020, G8 had $317 million of cash on its balance sheet, after paying down a net $100m in debt in the period leaving overall debt levels at around $295 million and net cash of $21.8 million. 


The solid cash position was supported by a range of factors including materially higher operating cash flows relative to 2019, lower than expected investing cash flows as acquisitions and capex decreased and an absence of dividend payments helping secure the maintenance of the strong cash position initially created by the capital raise in Q2 2020.


G8 confirmed that there will be no dividend paid in 2020 with the dividend suspension remaining in force, but noted that it will be reviewed at the half year results in August 2021. 


The Group also confirmed that ten greenfield acquisitions are tracking to be opened in 2021 using their new capital lite greenfield model. 


Outlook for 2021 conservative as G8 positions for ‘recovery year’ 


G8 sounded a conservative note in its assessment of 2021 citing the absence of Government subsidies and the continued impact of COVID-19, particularly on occupancy as key factors. 


Specifically, they mentioned movement restrictions in Victoria due to their COVID-19 mitigation strategies rolling over to 2021 and that around $0.8 million in fees had been waived by year to date to support affected families. 


In addition, uncertainties around unemployment in 2021, a key factor to consider as the JobKeeper payment program is due to expire in March 2021, were articulated. 


Mr Carroll said: “The strategic direction over the medium ‐ term is focused on further lifting quality and continuing to build a great team, to support delivering a world class differentiated education and care offering to G8’s families. The commitment and resilience demonstrated by our team members, particularly during this last challenging year, is absolutely critical to our success. They have and continue to provide the best learning foundations for our children and support for our families.”


To read this year’s investor presentation please click here and Annual Report please click here

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