Embark points to oversupply and softer demand as Centre EBITDA falls

Embark Early Education has reported softer demand and increased competition for enrolments in parts of its portfolio, with Centre EBITDA falling to $8.66 million in the first half of 2026 as the provider navigates increased early childhood education and care supply in some catchments.

ASX-listed Embark Early Education Limited has released its half-year results alongside a market update detailing occupancy, operating performance, its investment in Mayfield Childcare Limited and a further fully franked dividend.

Revenue for the six months to 30 June 2026 was $47.25 million, down 4.4 per cent from $49.41 million in the previous corresponding period.

Centre EBITDA, a non-IFRS measure used by Embark to assess the underlying operating performance of its early childhood centres, declined from $10.81 million to $8.66 million.

Underlying EBITDA was $6.75 million, compared with $8.96 million in the first half of 2025. 

Embark attributed the reduction primarily to softer demand across its centres, partially offset by management of labour and support office costs.

“The early childhood education sector continued to experience softer demand conditions in a number of markets, together with increased supply of childcare places,” the company said.

Embark provided further detail on the operating environment in its 28 August market update, describing occupancy performance as “a tale of two cities”.

As at 23 August, spot occupancy across 30 centres was 80 per cent, while nine centres were performing less strongly, which Embark attributed largely to oversupply.

In the most affected catchments, new centres established during the past three years have increased local capacity by up to 44 per cent, compared with a 14 per cent increase nationally over the same period, according to Embark. 

The provider said there were signs of improvement, with occupancy growth since May materially higher than in the previous corresponding period.

Embark suggested this could reflect reduced levels of new supply and the closure of marginally profitable existing centres.

Centre EBITDA for the week ending 16 August also exceeded the corresponding week in 2025, while wages represented 53 per cent of revenue for the week ending 23 August.

Embark noted that occupancy and EBITDA have historically been higher in the second half of the calendar year, with occupancy typically building after children transition from early childhood education and care to primary school early in the year and reaching a peak in November. 

Embark recorded a statutory loss after tax of $12.74 million for the half year, compared with a $4.04 million profit in the previous corresponding period.

The result included approximately $15.3 million in non-cash impairment charges.

The largest was an $11.4 million impairment of Embark’s investment in Mayfield Childcare Limited, alongside a $3.04 million impairment against goodwill and $823,000 against right-of-use assets. 

Embark increased its ownership interest in Mayfield to 49.8 per cent during the half year, giving it significant influence and resulting in the investment being accounted for as an associate.

The provider said the $11.4 million impairment reflected a decline in Mayfield’s share price. Mayfield shares had been acquired at $0.50 per share and were trading at $0.18 at 30 June 2026.

The goodwill and right-of-use asset impairments related to three centres, with no impairment identified across the remaining 36 centres.

Embark said the estimated recoverable amount of its centre portfolio exceeded its carrying value by approximately $90 million on an aggregate basis. The impairments were non-cash accounting adjustments and did not affect group operating cash flows. 

Embark introduced an average fee increase of 5.3 per cent from 8 August.

The provider said the increase was introduced to cover a 4.75 per cent increase to award wages from early July, noting that its actual wage costs increased by more than 4.75 per cent once on-costs were included. 

Net cash generated from operating activities was $8.93 million for the six months to 30 June, compared with $9.82 million in the previous corresponding period.

At 30 June, Embark held $6.29 million in cash and cash equivalents, down from $20.66 million at 31 December 2025.

During the half year, the group invested $11.17 million in Mayfield and paid $6.11 million in dividends. 

By 28 August, Embark reported cash on hand of $14.6 million, before meeting its Mayfield rights issue obligation, with cash exceeding drawn debt by $12.2 million. 

Embark also renewed three facility agreements with NAB on 31 July, including arrangements covering bank guarantees for centre rental deposits and credit cards for centre and area managers.

A $25 million acquisition facility was renewed until 31 March 2028 and was drawn to $6.4 million at the time of Embark’s market update.

The provider said it was operating within the facility’s covenant limits and reported interest cover of 46 times on its drawn NAB facility as at 31 July. 

Embark also reported an increase in its family Net Promoter Score (NPS), which rose from 66 in 2025 to 70 in 2026.

The company said the result represented an improvement in family satisfaction and advocacy across its network. 

Alongside the results, Embark announced a further fully franked interim dividend of 1.5 cents per share.

The dividend has an ex-dividend date of 4 September and record date of 7 September, with payment scheduled for 21 September 2026. 

It follows two fully franked dividends of 1.5 cents per share paid during the first half of 2026, in March and June. 

Read the ASX announcements here.