Mayfield reports challenging 2023, appoints Canaccord to explore opportunities
Mayfield Childcare has released its full year 2023 results which highlight a challenging year for the group as it worked through a number of legacy corporate issues and a challenging operating environment.
Revenues rose by 9.5 per cent to $76.2 million and Group underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was $4.6 million down from $11.3 million reported last year.
The substantial fall in profits was attributed to challenging trading conditions in the first nine months of 2023 however Mayfield did confirm a stronger period of performance towards the end of the year, which has continued into 2024, that helped mitigate some of the shortfall.
“This year has been pivotal in laying down the foundations necessary for future growth,” Chief Executive Officer, Ashok Naveinthiran said.
“We have started 2024 positively, building on the progress of last year. Our early achievements are a testament to the strength of our new foundations and the effectiveness of our strategic focus areas: people, culture, quality, performance, and financial management.”
Group occupancy before divestments 67.8 per cent, after rises to 75.2 per cent
Occupancy across the Group was 67.8 per cent in 2023, around 1.2 per cent lower than in 2022 and substantially lower than its listed peers such as G8 Education that reported 70.4 per cent occupancy in 2023 and Embark Education that reported 82 per cent.
Mayfield did however note that as a cohort, 80 per cent of the core portfolio had an occupancy of approximately 80 per cent across the year, signaling just how significant the drag of underperforming centres is on overall group performance.
The four acquisitions completed in 2023 performed strongly with the company confirming it has negotiated in principle a revised incubator partnership model with Genius Learning Pty Ltd based on a review of the 2021 acquisitions completed by previous management and stakeholder feedback.
The revised terms (subject to shareholder approval as required) will incorporate an earnout and 100 per cent deferred consideration, coupled with further rights to reporting and Mayfield management control of incubator centres prior to acquisition.
Balance sheet feels the strain of difficult year as covenants breached
Challenging trading conditions as well as a new provision amounting to $1.39 million to address potential regulatory concerns relating to a non-compliant fee billing policy implemented by prior management in 2018 combined to impact key financial metrics required by Group’s banker as stipulated in the loan agreement.
Specifically, the fixed charge cover ratio (FCCR) and the financial debt to EBIT ratio fell short of requirements and as a result triggered the reclassification of $7.5 million of debt to a current liability.
That being said the lender has confirmed that it will not cancel or recall the Facility solely as a consequence of the breaches within a 12 month period from the date of signing the 31 December 2023 Financial Report provided that there are no further breaches of covenants or undertakings by the Company and no events of default.
Mayfield has around $362,000 of cash at bank at the end of the year having generated around $9.2 million of operating cash flow in 2023
Mayfield remains upbeat on 2024 as Cannacord brought in to explore opportunities
Having experienced a stronger than expected Q4 2023 and good start to 2024 Mayfield confirmed FY24 EBITDA guidance of $9 million – $9.5 million with centres approved for divestment providing additional profits of $1.0 million – $1.5 million underlying centre EBITDA once divested.
The Group noted that the 2024 focus is on organic growth by driving enrolment conversion rates, implementing further recruitment initiatives to remove staff bottlenecks and a focus on operational excellence and performance management at a centre level.
In addition, Mayfield confirmed that it is in the final stages of appointing Canaccord Genuity to explore a range of value accretive opportunities for shareholders going forward.
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