G8 full year 2023 results comfortably beat expectations, signals encouraging start to CY24

G8 Education has released its full year 2023 results in which it reported solid financial results at the revenue and profit line, a strengthened balance sheet and encouraging commentary about occupancy growth as at the start of 2024. 

 

Group revenue grew by 9 per cent to $983.4 million (compared to 4.0 per cent last year), with operating earnings before interest and tax increasing 25 per cent, and net profit after tax by 34 per cent. 

 

Employment costs as a percentage of revenue at the Group level were anchored, and at the centre level, which saw a 7.6 per cent increase in costs, wages as a percentage of revenue were 57.1 per cent, 0.7 per cent below last year’s figures. 

 

“Our team’s effort in 2023 saw G8 Education continue to improve its financial performance by focusing on improving experiences for its families and employees, while maintaining a disciplined approach to running our business, optimising our network, and carefully managing costs and our balance sheet,” Pejman Okhovat, CEO and Managing Director said. 

 

“Our focus on improving the experience of our families, children and team across a multitude of initiatives throughout the year resulted in higher retention of our team, improved quality ratings of our services and improved experiences for our families (which was) reflected in higher customer retention, higher enrolment conversions and improving NPS.”

 

Occupancy steady in 2023, but 2024 off to a good start as CCS changes flow through

 

G8 reported occupancy across its network of 430 centres as being 70.4 per cent, 0.2 per cent below last year, and 2.2 per cent below 2019 levels. 

 

Occupancy in the second half of the year also benefited from a step up in weekly attendance levels, with families placing their children in a G8 service for around 3.09 days a week since July 2024, up from around 3.05 days in the first half of the year, and 3.01 days in 2023. 

 

The larger states across Australia were reported to have performed in line or above CY22 levels, and successes in workforce attraction, retention and planning contributed to zero centres having capped occupancy due to workforce constraints. 

 

Group spot occupancy for the week ending 25 February 2024 was 66.3 per cent, 1.7 per cent higher than CY23, and year to date as 25 February 2024 was reported as 66.9 per cent, 1.2 per cent higher than CY23. 

 

Against that backdrop 90 per cent of G8’s centres are now rated as ‘Exceeding’ or ‘Meeting’ the National Quality Standard, while 93 per cent are ‘Meeting’ or ‘Exceeding’ NQS Quality Area 1 – Educational program and practice.

 

Notably strong balance sheet highlights quality of CY23 performance 

 

G8’s balance sheet benefited from a 47.3 per cent jump in cash flow from operations to $201.5 million, which even after meeting existing investing and financing obligations was sufficiently large to allow for $29.7 million of debt to be paid down and final cash balances for the year to increase.

 

The Group had $40.2 million of cash and cash equivalents as at the end of the year, up from $37.8 million last year, and long term debt of $99.9 million, down from $127.9 million. Net debt now stands at $58.7 million. 

 

Net debt to operating earnings before interest, tax, depreciation and amortization was just 0.4x, at very conservative levels. 

 

Interest cover, which measures the degree to which profits cover interest expenses, was 13.6x, a high number at a level that has helped G8 insulate itself from the financial consequences of rising interest rates.

 

Group optimisation efforts continue – Disposals slower than expected, Leor closed

 

The divestment of 31 underperforming centres announced in October 2023 is progressing, but at a pace slower than initially expected. 

 

Nine centres have so far been transitioned to Genius Childcare with a further eight having in principle agreements to transition in place.  

 

The portfolio of 31 centres earmarked to be sold, representing around 7 per cent of the current G8 portfolio, are located across Australia and are expected to lose around $9 million in profit before tax in 2023. 

 

G8 also confirmed that it would be ending the offering of Leor as a provider of specialist in-home care and clinical allied health services and would instead focus the Group’s efforts on building skills for inclusive education and care programs across the organisation.

 

Leor was acquired by G8 in September 2021 for $2 million up front, with a further $7.5 million available in earnouts over the three years from CY2022 to CY2024. No earn outs were paid over the period. 

 

To read the CY23 results presentation, and other results releases, please click here.