Embark Education confirms strong start to 2023, steps up AU network expansion

Embark Education Group, the ASX listed early childhood education and care (ECEC) provider previously known as Evolve Education, has released its preliminary Full Year 2022 Results in which it confirms 2023 has started strongly for the Group and that the ongoing strategic focus will be network expansion. 

“The financial result for the year ended 31 December 2022 shows strength in the retained Australian operations with revenues increasing 35 per cent to NZ$59.5 million, underlying centre based EBITDA* increasing to NA$16.0 million and underlying Group EBITDA increasing by 32 per cent to NZ$14.4 million,” Managing Director Chris Scott said. 

“Occupancy in 2023 has started very strongly,” he added.

Embark owns and operates a network of 24 centres in Australia. Average occupancy in January and February 2023 was 78.0 per cent and 74.0 per cent respectively, compared to 70.6 per cent and 73.0 per cent in the same periods last year. 

“Strong occupancy in January and February generally augurs well for the rest of the year,” Mr Scott said before adding that this can be variable.

Mr Scott also noted the upcoming increases to government subsidies (CCS) from 1 July 2023, saying it is likely that “nearly all family income bands will benefit from these changes.”

Currently weekly EBITDA is tracking at around AU$220,000 across the network, up 35 per cent on last year.  

Exit from New Zealand now complete, with proceeds directed at debt reduction 

The sale of Embark’s New Zealand business was completed on 20 September 2022 for the sum total of NZ$46 million less net debt, a capex adjustment and associated settlement adjustments and an exit multiple of 13x FY21 underlying EBITDA. 

A one off non operational book loss of NZ$42.7 million relating to the divestment of the New Zealand business was included in the 2022 Full year results. 

With the transaction completing in September 2022, all teaching and support office staff were transferred to the new owners, Anchorage Capital, as planned. 

In December of 2022, Embark repaid all of its outstanding medium term notes and currently holds no debt. The company has cash reserves of NZ$26.7 million, around AU$29 million, as of 25 February 2023. 

Australian growth a key strategic priority for Embark 

With the sale of the New Zealand business now complete, and all proceeds reinvested in securing the health of the company balance sheet Embark’s management are now focused on growing the size of the Australian network. 

Legal documentation is currently in place for the purchase of three childcare centres generating AU$2.1 million estimated EBITDA for a total purchase price of $2.7 million, an acquisition multiple of 3.43x. 

The Group has confirmed that other acquisitions are being actively pursued but drew the line at greenfield developments, which will not be part of its strategic objectives. 

A secondary focus of the Group is to continue extract organic growth from the existing portfolio through a range of occupancy, revenue and cost management initiatives. 

To review this year’s results please visit their ASX site here.