Evolve Education’s Australian services drive FY21 performance as New Zealand contends with COVID

Evolve Education Group has released its Full Year 2021 results in which more benign Government responses to COVID-19 in Australia relative to New Zealand saw its Australian network drive performance across the year. 

Revenues of $158.0 million were up 15 per cent year on year and earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $12.6 million, at the top end of revised the guidance provided in Evolve’s pre-close trading statement released in December 2021.

The Australian network of 23 centres in Victoria, Queensland and Tasmania contributed $9.9 million of EBITDA, more than double last year’s contribution, helped by acquisitions and improved occupancy. 

The New Zealand network of 109 centres however had a more challenging year as Government actions to lock down or restrict access to early childhood education and care (ECEC) centres were frequent with cities such as Auckland under either Level 3 or Level 4 restrictions for at least 117 days of the year. 

This contrasted with Australia where authorities did not mandate closure of centres or restrict access to families unless a COVID-19 case existed in 2021 and where almost all Evolve centres were open throughout the year.  

Against this backdrop New Zealand’s underlying EBITDA was adversely impacted by approximately $6 million as lost parent fees and the absence of cost mitigating wage subsidies, which were available in 2020, were felt. 

Strong balance sheet allows for refresh initiatives and portfolio optimisation

Evolve reported a cash balance of $47.6 million as of 31 December 2021 and long term debt of $36.2 million which nets off to a net cash position of $11.4 million, a substantial cushion that will provide resources for management to initiate a range of in-centre optimisation initiatives. 

On that note the Board has approved a $4.5 million targeted capital expenditure plan for its New Zealand network with a focus on facilities and resources. The plan is currently underway. 

From a portfolio optimisation perspective a number of divestments have been authorised in New Zealand with six low margin centres having received Board Approval to be transitioned out of the Group as at 31 December 2021. 

Two of the six centres have now been sold. 

Looking ahead Evolve has cited the uncertainty around the current wave of Omicron spreading through New Zealand as a key factor in withdrawing earnings guidance for 2022 noting that “Whilst Omicron has peaked in Australia, the variant has only just started to spread widely in New Zealand and further temporary centre closures are expected over coming months.”

To read Evolve’s Full Year Results media release click here and for the presentation click here.