G8 Education records strong second half performance according to latest trading update

G8 Education has reported a substantial increase in earnings across the five months ended November 2022 as occupancy momentum and effective workforce cost management mitigated shortfalls generated at the start of the year. 

 

Earnings before interest and tax (EBIT) across the five months to 30 November was $50 million, up from $35 million in the same period last year, and more than double the $21 million generated in the first half of 2022. 

 

The strong results helped the group claw back some of the lost performance in the early part of the year caused by a combination of the Omicron COVID-19 wave and flooding in parts of Queensland and New South Wales which created a $16 million shortfall in earnings. 

 

Overall year to date operating EBIT (after lease interest) was $71 million, compared to $76 million last year, and operating NPAT was $41 million compared to $43 million last year. 

 

Core Group occupancy at 77.3 per cent as at week ended 4 December 2022

 

Occupancy for the week ended 5 December 2021 came in at 77.3 per cent, 1.0 per cent above the same point last year but still lower than 2019 levels by 1.3 per cent.  

 

The average occupancy for 2022 year to date stands at 70.8 per cent, roughly the same as 2021 levels which were 70.7 per cent. 

 

The growth trajectory of occupancy in the second half of 2022 showed a marked improvement on last year and tracked more closely that experienced in the last full pre-COVID calendar year in 2019. 

 

On a state and territory basis year on year occupancy growth was reported in New South Wales, Queensland, Victoria and the ACT with Queensland’s 57 centres reporting the highest occupancy as at 30 November of 84.7 per cent. 

 

South Australia and Western Australia both recorded year on year occupancy declines with levels of 74.6 per cent and 78.0 per cent respectively reported as at 30 November.  

 

Despite the relatively solid performance G8 noted that workforce shortages continue to impact occupancy and conversion rates with a portion of the network constrained by team member availability. 

 

Strategic focus squarely on workforce and quality initiatives remains 

 

G8 remains focused on executing a range of initiatives across the workforce and quality areas of the business, with the former being a particular priority at the moment.  

 

The group noted that its multifaceted approach to addressing the workforce shortages remains in play with additional ”field support” roles and continued above award remuneration targeted at centre leaders. 

 

Additional paid leave, dedicated teacher registration resources and above award remuneration packages have been designed for early childhood teachers (ECT) and an emphasis on increased flexibility, development opportunities and service recognition supporting educators. 

 

G8 also continues to develop and expand its Study Pathways Program which now has c.1,000 enrolments in the Certificate III and Diploma programs and 450 enrolments in Bachelor study programs. 

 

Implementation of the new HRIS system, coupled with enhanced training and processes, resulted in positive wage performance in the period helping mitigate a generalised increase in wage costs of 8.0% year to date, comprising an internal wage rate increase of 4.7% and increased agency usage. 

 

From a quality perspective the centralised Improvement Program is complete with the program rolled out across the network including refreshed educational resources in each centre with the program now transitioning to a ‘Business As Usual’ approach focused on sustaining and continuously improving centre quality. 

 

The Group now has around 89% of its network achieving ‘Meeting’ or ‘Exceeding’ the National Quality Standard. 

 

Ongoing focus on active capital management underwrites balance sheet health

 

Over the course of 2022 G8 acquired around 31 million shares, totalling $32 million via its on-market share buyback to 9 December 2022 with a further $8 million to be spent before the program concludes in Q1 2023. 

 

Year to date debt levels increased to $87 million, from $17 million last year, reflecting an increased draw down in the January to June period of this year to finance the full year CY21 dividend, buyback and capex during the seasonally lower earnings period. 

 

Operating cash flows financed July to November capex, dividends and buyback requirements with debt levels remaining flat since the first half closed in June of this year. 

 

Current net debt to earnings before interest tax depreciation and amortisation (EBITDA) stands at 0.9x, slightly lower than that reported in their half year results. G8 also confirmed that the debt refinancing process is on track including extending existing October 2023 expiry to increase tenor with a staggered debt profile and facilities, with sustainability-linked performance targets. 

 

To read the latest G8 trading statement click here.