G8 Education reports solid progress towards strategic goals but results clouded by softening demand

G8 Education has reported its half year 2024 results in which a solid financial performance and progress towards meeting strategic objectives has been outweighed by a confirmation of lower enquiry rates that are feeding through to subdued occupancy growth.

“G8 Education’s performance during the first half of CY24 demonstrates our progress on delivering a ‘fit core’ with a key focus on operational imperatives and delivering earnings growth in a challenging environment,” Managing Director and Chief Executive Officer Pejman Okhovat said.

The Group reported operating revenue of $481.7 million in the first half, 5.6 per cent higher than the same period last year, with centre operating earnings before interest, tax, depreciation and amortisation (EBITDA) of $72.5 million, up 11.9 per cent year on year. 

“Our team’s strategic cost management and conservative balance sheet approach coupled with achieving operational efficiencies and positive occupancy results have contributed to the Group’s solid CY24 H1 financial performance,” Mr Okhovat added. 

Progress on strategic initiatives a positive stand out in HY24 results

G8’s corporate strategy is anchored around six key strategic focus areas namely; team, family experience, quality, education & inclusion, operating model and financial sustainability, each of which is paired with a KPI measure used to track progress. 

Relative to last year the Group reported healthy improved performances across five of the six domains with the lagging one being occupancy which grew by a relatively muted 0.8 per cent year on year.

Notable progress was made in the team initiative area with overall team vacancies falling 43 per cent year on year alongside centre manager retention rates rising to 84 per cent and ECT rates up to 69 per cent. Additionally, the number of student enrolments into G8 qualification programs increased with particular strength in the diploma stream. 

In the family experience domain, the Group’s Net Promoter Score (NPS) rose 16 points to 48, indicative of strengthening family feedback and quality as measured by the percentage of G8 centres rated meeting or exceeding the National Quality Standards rose to a new high of 91 per cent. 

Enquiry numbers softening as G8 becomes second ASX listed provider to confirm trend

Alongside the encouraging broader business performance a notable stand out was confirmation that enquiry levels were lower year on year, a development that was also confirmed by fellow ASX listed provider Nido Education in its recently announced HY24 results. 

Average occupancy in the first half of 2024 for G8 was 68.2 per cent, up from 67.4 per cent, with average year to date occupancy also tracking above last years levels, however the strong start to 2024 has gradually eroded with “spot” occupancy tracking 0.1 per cent behind compared to last year after being as much as 1.7 per cent ahead in February 2024. 

“Against the macro-economic environment, lower enquiries, consistent with the broader sector, have resulted in occupancy growth softening in Q2,” Mr Okhovat added.

“This demands that we maintain our disciplined focus on our team engagement position, improve our family experience including our enrolments and transition, continue to maintain capital and cost disciplines and implement our ‘fit core’ strategic plan initiatives leading into 2025.”

Network optimisation continues, “buy back” signals significant growth not on cards

G8 continues to focus its network efforts on rationalising its broader portfolio of centres with the Group confirming that fifteen centres were divested in the period with three other centres surrendered. 

As at June, the Group had 414 centres across Australia with the largest state and territory exposure in New South Wales, which accounted for 35 per cent of the portfolio, followed by Victoria at 32 per cent. 

G8 also provided an update of progress under the previously announced deal to transition 31 underperforming centres to Genius Childcare with confirmation that thus far 18 of the 31 centres have been transitioned across to Genius with the balance expected to remain within the G8 portfolio becoming part of the ongoing network optimisation plans. 

Elsewhere G8 confirmed the commencement of an on market buy back of up to 5 per cent of issued share capital which will see a portion of the Group’s excess financial reserves returned to shareholders, a move that reinforces the view that network optimisation as opposed to network growth will remain the focus for the foreseeable future. 

To review G8’s HY 2024 media release and accompanying presentation please visit their website here.