G8 Education Limited · ASX:GEM
G8 Education — Investor Day (November 2018)
73 slides from G8 Education's investor day presentation, Nov 15, 2018
Slide 1: 2018 Investor Day Trading Update
For personal use only 2018 INVESTOR DAY TRADING UPDATE 15 NOVEMBER 2018
Slide 2: Disclaimer
DISCLAIMER For personal use only The material in this presentation has been prepared by G8 Education Limited (G8) and is general background information about G8’s activities current as at the date of this presentation. The presentation does not purport to be complete and should be read in conjunctio
Slide 3: Agenda
AGENDA For personal use only G8 EDUCATION LIMITED TRADING UPDATE ASX: GEM Gary Carroll MEDIUM TERM TARGETS Sharyn Williams LEASE ACCOUNTING & CAPITAL MANAGEMENT UPDATE Sharyn Williams Q&A Gary Carroll and Sharyn Williams 3
Slide 4: Trading Update
For personal use only TRADING UPDATE GARY CARROLL
Slide 5: Occupancy – Recent Trends
OCCUPANCY – RECENT TRENDS For personal use only Steady improvement has continued into CY18 Q4 Average Monthly Occupancy* (%) Occupancy* improvement from January base (%) 12% 100% 2016 2017 2018 11% 2016 2017 2018 10% 90% 9% 8% 7% 80% 6% 5% 4% 70% 3% 2% 1% 60% 0% -1% -2% 50% -3% Jan Feb Mar Apr May J
Slide 6: Wage Performance
WAGE PERFORMANCE For personal use only Trending in line with expectations Fortnightly Wages hours per booking (2018 YTD vs 2017) • Wage performance, represented by Wages Hours Per Booking, has continued the trend established in May, tracking in line with the prior corresponding period 2017 2018 • Th
Slide 7: Greenfields Pipeline
GREENFIELDS PIPELINE For personal use only Centre Portfolio • Deferments of Greenfield openings into CY19: o 9 centres targeted in CY18 H2 (previously 12) 600 o 19 centres now targeted in CY19 (previously 16) Singapore Australia 18 500 18 20 21 18 • Deferments timed to coincide with the seasonal upt
Slide 8: Prior Year Acquisitions
PRIOR YEAR ACQUISITIONS For personal use only Greenfields in line, brownfields below expectations • 2016 and 2017 greenfield acquisitions are performing • Increased workload due to CCS integration and roll in line with expectations out of the new Xplor platform impacted the timing of the rectificati
Slide 9: Summary & Outlook
SUMMARY & OUTLOOK For personal use only • Like for like occupancy growth is slightly ahead of • CY18 is expected to deliver EBIT of $136-139m management expectations • This is in line with market consensus and takes into • Wage Performance has continued to track in line consideration: with expectati
Slide 10: Medium Term Targets
For personal use only MEDIUM TERM TARGETS SHARYN WILLIAMS
Slide 11: Medium Term (CY22) Targets
MEDIUM TERM (CY22) TARGETS For personal use only Based on organic and committed greenfield centres Group like for like average occupancy grows to 81% Greenfield pipeline achieves 25% ROI (on committed $165m GF pipeline) Achieve a ROCE* greater than 15% *ROCE = Underlying EBIT/(Shareholders Equity [a
Slide 12: Key ROCE Drivers
KEY ROCE DRIVERS For personal use only Delivery of strategic goals results in CY22 ROCE of 18.5% • FY22 ROCE target driven by: o Average like-for-like group occupancy lifting to 81% 18.5% o Current greenfields pipeline achieving target 25% ROI o New revenue streams o Margin expansion 12% • Note accr
Slide 13: Key Occupancy Drivers
KEY OCCUPANCY DRIVERS For personal use only Indicative bridge to CY22 Target Occupancy of 81% • FY22 Occupancy target of 81% to be driven by: o Reduction in Centre Manager (CM) turnover 6% o Operationally driven improvements from Quality & Innovation initiatives Occupancy % pts • Achievement of the
Slide 14: New Lease Standard & Capital Management
For personal use only NEW LEASE STANDARD & CAPITAL MANAGEMENT SHARYN WILLIAMS
Slide 15: Lease Standard Expectations
LEASE STANDARD EXPECTATIONS For personal use only • Income statement – operating lease expenses (e.g. rental expense) will be replaced by depreciation and interest • Balance sheet – leases (except short-term or low value) recognised as a right of use asset and associated liability • Lease liability
Slide 16: Capital Management
CAPITAL MANAGEMENT For personal use only Reinforcing balance sheet strength Refinancing update Debt ratios • Secured $400 million syndicated bank debt facility on • Net Debt/EBITDA of 2x at 30 June, 2018 more favourable terms to refinance: • Refinancing has left the balance sheet in a strong • $270
Slide 17: For personal use only
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Slide 18: 2018 Investor Day
For personal use only 2018 INVESTOR DAY INVESTOR PRESENTATION 15 NOVEMBER 2018
Slide 19: Strategy Update
For personal use only STRATEGY UPDATE GARY CARROLL 2
Slide 20: Sector Dynamics
SECTOR DYNAMICS Resilient with good long term fundamentals For personal use only BENEFITS AND IMPROVED DEMAND SHIFT FAVOURS HIGHLY FRAGMENTED SUPPLY GROWTH AFFORDABILITY TO BOLSTER QUALITY AND SCALE WITH STRUCTURAL MODERATING OCCUPANCY GROWTH DRIVERS • Extensive research shows that formal Early • Oc
Slide 21: Scale to Unlock Latent Portfolio Potential
SCALE TO UNLOCK LATENT PORTFOLIO POTENTIAL Scale drives innovation & sustained customer experience advantage For personal use only • Ability to form partnerships, in areas such as curriculum and health, to drive differentiated, value- based offer and experience • Ability to provide compelling career
Slide 22: Culture Is Key to Unlocking Scale
CULTURE IS KEY TO UNLOCKING SCALE G8 is a people business For personal use only • People businesses require supportive cultural elements • A values-based and performance culture is imperative to establishing and sustaining our scale- led competitive advantage 5
Slide 23: Clear Path to Growth
CLEAR PATH TO GROWTH Driven by scale and culture For personal use only STRATEGIC BUILD STRENGTHEN CREATE CONTINUE PRIORITIES A GREAT THE SUSTAINABLE PROFITABLE TEAM FOUNDATION DIFFERENTIATION GROWTH 6
Slide 24: The G8 Journey
THE ASX LISTING * Acquisition strategy "a7 centres FOUNDED BUILT SCALE +500 centres +24 "brands", Inherited + c.480 centres . * Singular focus on growth . * Decentralised decision making, processes, . systems, training and rostering . + Committed Greenfield (GF) pipeline . * Build of unified G8 Cult
Slide 25: Create Sustainable Differentiation
For personal use only CREATE SUSTAINABLE DIFFERENTIATION BRAND, MARKETING, CUSTOMER OFFER & EXPERIENCE GREG BOWELL 8
Slide 26: Brand, Offer & Customer Journey
( 6 ) BRAND, OFFER & CUSTOMER JOURNEY ASX LISTING COMPANY + Acquisition strategy FOUNDED 47 centres ROLL OUT INNOVATION PILOTS BUILT SCALE + ~500 centres Inherited +24 "brands" “ . + Corporate brand disengaged from sector . + 24 logos (not brands) . * Acquisition centric not customer centric . * Min
Slide 27: Brand, Offer & Customer Journey: Untapped Brand Potential
BRAND, OFFER & CUSTOMER JOURNEY Untapped brand potential For personal use only • Sector and G8 lacked strategic, customer led marketing • It shows in the data: o 20% participation, 0-4 year olds o 66% attend due to employment commitments • Master Brand disconnected from sector and ineffectual 24 ‘lo
Slide 28: Deep Customer Understanding
THE BRAND, OFFER & CUSTOMER JOURNEY Deep customer understanding For personal use only • Foundational Research completed o Customer Insights into the sector o 4 clear and differentiated Personas o Complete Customer Journey • Customer validated “pain points” in the Journey o Website o Call centre/CRM
Slide 29: Deep Customer Understanding: Innovation Pilots
THE BRAND, OFFER & CUSTOMER JOURNEY Deep customer understanding For personal use only • Aligned customer experience (CX) with our people experience (PX) for a ‘best in class’ approach; when our people thrive, our customers thrive • Recently launched innovation pilots: o I Love Reading program o Kind
Slide 30: Customer Insights
CUSTOMER INSIGHTS Driving participation rates through advocacy For personal use only • Our in depth customer research reveals an immense opportunity exists for G8 to lead societal change against the ‘Care Compromise’ • Adding Learning to Care will shift attitudes to Early Learning thereby driving lo
Slide 31: Customer Personas & Customer Journey
CUSTOMER PERSONAS & CUSTOMER JOURNEY For personal use only 14
Slide 32: Converting Pain Points to Enrolments
CONVERTING PAIN POINTS TO ENROLMENTS To improve occupancy and experience For personal use only Current G8 website • New Corporate and Brand websites under development • CRM phase 1 - booking process tool o Supports centre managers processing parent enquiries and tours etc o Waitlist management o Rem
Slide 33: Winning the 'Moments That Matter'
THE BRAND, OFFER & CUSTOMER JOURNEY Winning the ’moments that matter’ For personal use only • To win we turn ‘pain points’ into value drivers and embed ‘moments that matter’ into customer experience standards o Each function will understand their role by end of CY18 for CY19 rollout o Clear measure
Slide 34: Winning the 'Moments That Matter': Call Centre Rollout
THE BRAND, OFFER & CUSTOMER JOURNEY Winning the ’moments that matter’ For personal use only • Roll out call centre o Externally managed enquiries and tour booking o Introduction of refined customer processes from enquiry to enrolment o Embedded in 100 centres January 2019, all 500 all centres by ear
Slide 35: Digital Transformation
DIGITAL TRANSFORMATION For enhanced experience For personal use only Xplor Hope App • First stage on path to sector-leading, dynamic web platform - Sitecore • New Corporate website to be rolled out in CY19 Q3 to reflect G8’s customer centric and sector leading strategy • Xplor Parent App will be key
Slide 36: Benefits for Parents
BENEFITS FOR PARENTS ”Value” based offer that supports affordability For personal use only • Perception is expensive “care” with some inclusions but little perceived added ”value” • We are leveraging our scale and insights to differentiate and improve the quality of our offer • ‘Benefits for Parents
Slide 37: First Choice Early Learning Centre in Every Area
THE BRAND, OFFER & CUSTOMER JOURNEY To being the first choice Early Learning centre in every area For personal use only • Master Brand is currently under review • Leverage and establish a true brand position for each sub brand that aligns with the Master Brand and the customer personas • Allows us t
Slide 38: Build a Great Team, Strengthen the Foundation
For personal use only BUILD A GREAT TEAM STRENGTHEN THE FOUNDATION GARY TEAM, CARROLL OPERATIONS & CENTRE NETWORK JASON BALL 21
Slide 39: The Team Journey
ASX LISTING + Acquisition strategy COMPANY 47 centres oooeD BUILT SCALE + ~500 centres + 24“brands", Inherited *~11 fold increase in centres * Nocentralised people management (pay/training) . + Many promoted early without requisite skills . + Incohesive cultures from lack of integration + Minimal HO
Slide 40: Growth Without Cohesion
THE TEAM JOURNEY Growth without cohesion For personal use only • Acquisition strategy created a scalable portfolio but this rapid growth outstripped people capability and numbers • Mergers of many businesses created an inconsistent culture and high team turnover Centre Manager requirements 23
Slide 41: Early Learning Is About Trust
THE TEAM JOURNEY Early Learning is about trust For personal use only • Parents entrust us with the most precious thing in their lives • Relationships between educators and families contribute to the village that helps raise a child 24
Slide 42: What Parents Want
THE TEAM JOURNEY What parents want For personal use only • Families want consistent, stable, quality educators above all else 25 Data from 2018 PricewaterhouseCoopers Parent Survey of 55,000 families
Slide 43: G8 Is a People Business
THE TEAM JOURNEY G8 is a people business For personal use only Is correlated with high centre Which drives lower Net And lower centre High staff turnover… manager (CM) turnover Promotor Scores occupancy 45% 30% 60 56 90% 82% 40% 27% 40% 80% 76% 25% 50 44 35% 70% 30% 20% 40 60% 25% 50% 15% 13% 30 20%
Slide 44: Focus on Centre Manager Stability & Team Turnover
THE TEAM JOURNEY Focus on Centre Manager stability & team turnover For personal use only • 2017 “Have your Say” employee survey highlighted the focus areas for the Retention Strategy: o “To have support” and “to feel valued” were in the top 3 responses o Desire to have good training rated 3 times th
Slide 45: Focus on Centre Manager Stability & Team Turnover
THE TEAM JOURNEY Focus on Centre Manager stability & team turnover For personal use only • Leveraged scale opportunity to: o Provide operational and day to day business support (90% centre employees satisfied/highly satisfied *) o Invest in our talent and provide career pathways through training & d
Slide 46: Total Pay & Benefits
TOTAL PAY & BENEFITS Innovative, cost effective way of delivering “value” to team For personal use only Some of our Playground brand partners • Leveraged scale to form partnerships and offer employee discounts • Our wellness initiative, Active8, provides discounted gym memberships, counselling and s
Slide 47: How Has Life Changed for Our Employees?
THE TEAM JOURNEY How has life changed for our employees? For personal use only 30
Slide 48: Remove Pain Points to Enhance Capability & Engagement
THE TEAM JOURNEY Remove “pain points” to enhance capability & engagement For personal use only • Streamline Centre Manager and Area Manager roles: o Work routines – embed best practice and win the ‘moments that matter’ o Improve processes from Support Office functions • Enhance leadership capability
Slide 49: First Choice Early Learning Centre in Every Area
THE TEAM JOURNEY To being the first choice Early Learning Centre in every area For personal use only • Leverage our scale advantage to: o Provide differentiated professional development and career opportunities that not only retain but attract the best people -> lower turnover centres have higher oc
Slide 50: For personal use only
For personal use only • Limited centralised decision making • Limited centralised data • Limited centralised systems 33
Slide 51: Systems, Processes and Information Lagged Growth
THE OPERATIONAL JOURNEY Systems, processes and information lagged growth For personal use only • Centre operations were inconsistent across the portfolio o Rapid acquisition growth outpaced best efforts for centre integration o Centres given autonomy with limited head office (HO) support • Limited c
Slide 52: Laying the Foundations
THE OPERATIONAL JOURNEY Laying the foundations For personal use only • Transitioned through significant regulatory changes: o Ratio and supervision changes - Oct 17 o National Quality Standards changes - Feb 18 o Child Care Subsidy CCS - July 18 o Change of Child Care Management System (CCMS) - CY18
Slide 53: Quality Drives Occupancy
QUALITY DRIVES OCCUPANCY National Quality Framework For personal use only 36
Slide 54: Quality Drives Occupancy
QUALITY DRIVES OCCUPANCY National Quality Framework For personal use only 37
Slide 55: Quality Drives Occupancy
QUALITY DRIVES OCCUPANCY National Quality Framework For personal use only 38
Slide 56: Widening the Quality Gap
THE OPERATIONAL JOURNEY Widening the quality gap For personal use only • Concentrated focus on improving NQS ratings: o Develop a curriculum framework in CY19 Q1 that delivers and exceeds the NQF o Elevate Early Learning to advocate the benefits for children o Partner with leading sector professiona
Slide 57: Xplor H.O.P.E
For personal use only 40 XPLOR H.O.P.E
Slide 58: Driving Operational Efficiencies
THE OPERATIONAL JOURNEY Driving operational efficiencies For personal use only • Labour scheduling and rostering system to drive further wage efficiency – CY19 Q3 rollout o Dynamic workforce planning o Award and regulatory interpretation o Casual pooling o High single digit millions in annualised co
Slide 59: First Choice Early Learning Centre in Every Area
THE OPERATIONAL JOURNEY To being the first choice Early Learning Centre in every area For personal use only • Attract families via high quality, high appeal centres as well as stable and capable teams -> take market share • Optimise centre operational efficiencies via ‘fit for purpose’ systems and t
Slide 60: The Centre Network Journey
4B THE ( G ) CENTRE NETWORK JOURNEY ASX LISTING * Acquisition strategy COMPANY 47 centres FOUNDED BUILT SCALE +500 centres + 24*brands” Inherited + Singular focus on growth + Inadequate reinvestment + No internal property team «Inconsistent portfolio design or standards * Ne centralised facilities S
Slide 61: Singular Focus on Growth
CENTRE NETWORK JOURNEY Singular focus on growth For personal use only • Inconsistent asset quality and standards o High acquisition focus o Property maintenance and repairs managed individually at centre level • No clear network strategy o Approached by developers and brokers for opportunities o Vas
Slide 62: Resetting Expectations and Processes
CENTRE NETWORK JOURNEY Resetting Expectations and Processes For personal use only • Strategic network plan completed o Filtering/hurdle processes and targets established and applied o Portfolio management commenced • Established new integration processes o Accelerate occupancy build up for new centr
Slide 63: Case Studies: High Appeal Centres Have High Occupancy
CASE STUDIES High appeal Centres have high occupancy For personal use only Kinder Haven Vaucluse Community Kids Morisset • Issue: centre did not have a nursery room and only • Issue: competing centres were offering inclusive meals offered places to 2-5 years – not “most appealing offer in the area”
Slide 64: Case Studies: High Appeal Centres Have High Occupancy
CASE STUDIES High appeal Centres have high occupancy For personal use only Bambino’s Harrington Park North Bambino’s Horningsea Park • Issue: change of Centre Manager in late 2017 stimulated • Issue: poor quality yard a drop off in occupancy of 14% pts o not “most appealing offer in the area” impact
Slide 65: Case Studies: High Appeal Centres Have High Occupancy
CASE STUDIES High appeal Centres have high occupancy For personal use only Kinder Haven Morningside • Issue: poor quality yard o Not “most appealing offer in the area” reducing conversion rates (enquires to enrolments) o New competitors opening in the area • Centre had the opportunity to be position
Slide 66: Greenfields Maturity Profile
GREENFIELDS MATURITY PROFILE For personal use only • Average capital invested per centre: circa $4m Target ROI of 25% 100.0% at 24 months • Breakeven occupancy: 5 months 81% • Occupancy maturity: 18 months Occupancy maturity • ROI at maturity: 25% Occupancy (%) 50% -% 0 5 12 18 24 Months * ROI defin
Slide 67: Greenfield Portfolio Performance
GREENFIELD PORTFOLIO PERFORMANCE For personal use only CY17 Cohort CY18 Cohort • 12 centres • 10 centres operating • 75% of centres have hit both the 5 month breakeven • 4 are recently opened but are on track to breakeven occupancy hurdle rate and are tracking to ROI target of within 5 months 25% wi
Slide 68: Creating a 'High Appeal' Portfolio
CENTRE NETWORK JOURNEY Creating a ‘high appeal’ portfolio For personal use only • Lift the standard and appeal of the centre network to requisite level o Refresh program: ▪ 100 centres in CY19, 100 in CY20 ▪ Total capex $20m ($10m p.a.) o Refurbishment strategy ▪ Roll out CY18 and CY19 ▪ Total capex
Slide 69: Creating a 'High Appeal' Portfolio
CENTRE NETWORK JOURNEY Creating a ‘high appeal’ portfolio For personal use only • Finalise legacy commitments o CY18 H2 GF - 9 centres o CY19 GF - 19 centres o CY19 Brownfield - 3 Eclipse centres • Portfolio optimisation o Leverage scale and purchasing power o Manage underperforming centres ▪ 32 und
Slide 70: First Choice Early Learning Centre in Every Area
CENTRE NETWORK JOURNEY To being the first choice Early Learning Centre in every area For personal use only • Investment criteria o Revised methodology using data led mapping to target locations o Investment per licence place (LP) to drive ROI and Group ROCE o Lease terms and agreements that provide
Slide 71: Summary & Conclusion
For personal use only SUMMARY & CONCLUSION GARY CARROLL 54
Slide 72: Q&A
For personal use only 55 Q&A
Slide 73: Thank You
For personal use only THANK YOU