Reporting
G8 focus on strategic objectives yields 2021 results as dividend resumes after long hiatus
Jason Roberts
Feb 22, 2022
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G8 Education Ltd has reported its full year 2021 results in which an ongoing focus on strategic priorities, notwithstanding the challenges brought on by COVID-19, is starting to yield results with the Group now sufficiently confident in future prospects to recommence dividend payments.
“Given the challenges presented by COVID-19 throughout the year, I am pleased with the result we have been able to achieve,” Gary Carroll, Chief Executive Officer and Managing Director said.“Throughout the year, we have continued to execute our strategic programs, which are focussed on quality, community and sustainability. Our improvement program has continued to deliver strong financial and quality performance results, reinforcing our investment program.”
“I am hugely grateful to our exceptional team who, despite the challenges posed by the pandemic, have been adaptable and consistent in delivering a great experience for our families.”
Operating and financial performance in 2021 impacted by COVID-19 disruptions
The Group reported revenues of $828.0 million in 2021, up substantially from the depressed levels of 2020, but 6.9 per cent lower than 2019, the last full financial period prior to the start of the pandemic.
A smaller overall network of 429 centres, compared to 482 centres in 2019, and a COVID-19 driven falls in occupancy from 73.0 per cent to 70.9 per cent over the same period were key contributors to the reduction, although year on year fee increases of 6.0 per cent passed in early 2022 acted as a mitigant.
Centre margins were 16.6 per cent in 2021, broadly similar to 2019 as a range of initiatives including cost management, roster optimisation and lower margin centre divestments helped protect core centre profits from being adversely impacted by revenue falls.
Notably, overall Group margins fell relative to 2020 and 2019 as significant spend at the head office level, primarily on field based and centralised teams who work closely with centres across a range of functions and IT related platforms, was felt.
Strategic priorities of quality, community and sustainability key priority for G8
Despite intermittent disruptions from COVID-19 during 2021 G8 continued to invest in and progress initiatives from its corporate strategy designed to create sustainable long term growth for the group.
From a quality perspective the Group now has 86 per cent of centres rated meeting or exceeding the National Quality Standard with 92 per cent of all centres and 100 per cent of centres participating in the Improvement Program achieving meeting or better in 2021.
The Group’s commitment to family engagement saw substantial increases in Net Promoter Scores (NPS) with a six point jump to 52 recorded in 2021. Notably centres in the Improvement Program saw an eight point jump compared to last year.
Team engagement improved as a basket of initiatives including remuneration rises, training and development support, investment in centres and new induction processes increased overall engagement levels to record levels.
Improved outlook, sound balance sheet triggers dividend resumption and buyback plan
After deferring the payment of its 2019 dividend payment in March 2020 as the pandemic commenced and not paying a dividend last year G8 will now be resuming its dividend payouts with a fully franked dividend of 3.0 cents per share announced.
In addition, G8 confirmed that it will be commencing an on market share buyback program that is authorised to acquire up to 10 per cent of the outstanding shares of the business with the specific volume and timing of acquisitions a function of a predetermined criteria.
As at 31 December 2021 G8 had paid back almost $200 million in outstanding debt in the year taking their gross debt level down to $95.1 million with net debt just $22.0 million after accounting for the $74.1 million of cash on the balance sheet.
With operational visibility and balance sheet stability G8 is well positioned to recommence distributions to equity stakeholders via dividends and share buybacks both of which will provide upward momentum to the company’s listed equity in the months ahead.
Centre based M&A quiet in 2021 but investments in Leor and Kiddo notable As announced in September 2021 G8 acquired specialist in home care and NDIS provider Leor as it moved to build exposure to the early intervention and disability support market as changing workforce and childcare patterns influence the delivery of early learning services.
This deal has now been complemented with the purchase of a 20 per cent stake in Kiddo, a mobile platform connecting and matching parents with carers to provide in-home care to children, for consideration of $1.0 million.
Elsewhere G8 acquired only one early childhood education and care centre in 2021 and divested or closed twenty five centres with focus on converting the Greenfield pipeline as the key network growth priority in the near term. To read G8’s Full Year Results media release click here and their presentation click here.
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