G8 reconfirms cautious trading outlook and updates on strategy progress at 2022 AGM
G8 Education has reconfirmed the Group’s current cautious trading outlook and provided an update on key strategic focus areas including network improvement, staff turnover rates and greenfield roll outs.
The update comes as the Group holds its 2022 Annual General Meeting at which both the Chairperson, David Foster, and Managing Director, Gary Carroll, deliver an address and procedural matters such as answering questions submitted by shareholders and overseeing the casting of votes take place.
This year Mr Carroll provided comment on current trading, which was broadly similar to that provided at the Q1 2022 trading update in early April, progress regarding key strategic initiatives and the current subsidy environment, in particular the measures introduced by the Federal Government regarding Child Care Subsidy cap.
Current trading performance and cost cut plans consistent with Q1 2022 trading update
Mr Carroll reiterated the challenges caused by Omicron and flooding in parts of Queensland and New South Wales on revenue, occupancy and profit performance for the first quarter of 2022.
Overall occupancy fell 2.1 per cent behind 2021 levels in early March, before recovering in the following weeks to be 0.8 per cent behind the prior corresponding period as at 3 April 2022 and operating earnings before interest and tax (EBIT) was approximately $16 million lower than the prior corresponding period.
To respond to the challenging environment a number of initiatives have commenced including the transitioning of the Improvement Program from a project structure to a business-as-usual mode as well as additional cost reductions, including reprioritising discretionary spending and programs.
Total cost reductions are targeted at $13 million – $15 million for the remainder of CY22, predominantly realised in H2.
“While the Q1 impacts are largely expected to be temporary, the COVID-19 operating environment remains uncertain, including the potential continuation of the impacts seen in Q1 of CY22, particularly in the absence of additional government support,” Mr Carroll noted.
Workforce initiatives yielding positive results on key personnel turnover levels
A key stand out to this year’s update on strategic priorities are the positive trends starting to be seen in the turnover rates of key personnel such as centre leaders and early childhood teachers (ECT), both areas where structurally high turnover has been a challenge in the past and exacerbated somewhat in today’s tight labour market.
Although no numbers were provided, G8’s centre manager turnover for those subject to new induction and onboarding programs has been demonstrably lower than historical rates and sufficiently strong to support a small reduction in overall centre manager turnover for the year thus far.
Similar trends have been experienced in the ECT cohort where a rebasing of remuneration rates that was implemented in late 2021, as well as ongoing professional development programs, has seen turnover rates reduce year to date.
The group also now has 950 students on study pathways programs, covering Certificate III, Diploma and Bachelor qualifications with a notable reduction in turnover rates recorded in this group of employees relative to the rest of the organisation.
Greenfield roll outs and impaired centre divestments tracking behind expectations
G8’s greenfield development program has been impacted by COVID-19 with delays in construction related activity leading to a smaller than expected completion rate of centres this year.
The Group confirmed six centres are forecast to be completed in the year and that three centres have been opened for the year to date of which two are tracking in line with expectations and the other behind.
Notably, G8 has made only small progress on the divestment of its portfolio of impaired centres that were identified as such as part of a review conducted in the second quarter of 2020, in the wake of their post COVID capital raise.
Fifty two centres were designated impaired and thus far, nearly twenty four months later, only 19 centres have been divested.
Mr Carroll noted that “Market activity was somewhat subdued in the first quarter given the operating environment, with increased activity expected over the coming months as market conditions normalise.”
To close his address, Mr Carroll thanked all of the G8 Education team for their expertise, compassion and commitment during an incredibly challenging period saying, “Our team have been front line workers during the pandemic and the support they provided our families and the broader population was an inspiration.”
A further update on trading will be provided at the half year results in August 2022.
To read the AGM address please click here.
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