Nido Education calls out “recent softening of new enrolments” in mixed HY24 results

Listed early learning provider Nido Education has released its half year financial and operational results in which it called out “softening of new enrolments” caused by “general cost of living pressures, continued work-from-home and shortages in qualified staff” and discount unwinding leading to a revision of future occupancy forecasts lower. 

 

Although the Group did not release current occupancy levels, average occupancy in 2024 is now expected to be 80 per cent, down from 82 per cent previously, and second half occupancy is likely to be closer to 83 per cent, down from an estimated 86 per cent previously. 

 

It is unclear at this juncture how other large early childhood education and care (ECEC) providers have been impacted by current trading conditions given Nido is the first listed operator to release its HY 2024 results however evidence of generalised moderating of demand has been flagged by Department of Education data released earlier in the year. 

 

Half Year centre results as expected but Full Year results to miss Prospectus forecasts 

 

Nido was still able to generate centre earnings before interest, tax, depreciation and amortisation (EBITDA) of $11.9 million in the six months ended June 2024, and Group EBITDA of $7.5 million, with the latter negatively impacted by shortfalls in management fees linked to developer led delays in the opening of greenfield sites initially flagged in its May trading statement.

 

The flow on effect of slowing enrolments and delayed management fee realisations will see CY 2024 Group EBITDA of around $23.2 million, 13 per cent lower than flagged in NIdo’s listing prospectus last year. 

 

Notably however the performance shortfall is expected to be mitigated from a financial perspective due to a favourable tax expense in CY 2024 as carried forward losses flow through from prior years.

 

Average fees daily fees now top $170 as 8.3% fee increases flow through 

 

Operationally Nido has confirmed that average fees across its network of 52 owned centres now stands at $171, around 8.3 per cent higher than the average of $157 in the first half of 2024 and marginally higher than the $170 forecast for the second half. 

 

Nido also confirmed an adjustment to discounting policies that came into effect in July 2024. Although no detail was provided it is understood that while these policies may negatively impact demand performance in the short term, rebased discounts will favour overall revenue per customer in the medium to long term.

 

Wages as a percentage of revenue in the first half was 60 per cent, a level more or less consistent with expectations, given revenue seasonality impacting metrics. Looking ahead the Group anticipates overall wages to revenue will fall towards 55 per cent in the second half. 

 

Incubator centre performance on track with signs development bottleneck easing

 

Although delays in opening new centres has been a challenge the thirteen open centres currently in the incubators are trading well, with four now on track to reach acquisition hurdles ahead of forecasts. 

 

Six of the thirteen centres are currently trading at in excess of 65 per cent occupancy, with four trading above 75 per cent occupancy, close to the six month occupancy hurdle of 80 per cent. 

 

Looking ahead Nido noted that due to the reduction in new homes being built, costs are stabilising, and in some cases, reducing, so the Group is seeing increased availability of trades which bodes well for greenfield openings going forward. 

 

To review Nido’s results click here.