G8 Education Limited · ASX:GEM
G8 Education — FY2021 Earnings Presentation
41 slides from G8 Education's earnings presentation, Feb 22, 2022
Slide 1: ASX Announcement
ASX Announcement G8 Education Limited (ASX:GEM) 22 February 2022 The Manager Market Announcements Office ASX Limited 20 Bridge Street Sydney NSW 2000 Dear Sir / Madam I enclose the Investor Presentation for the full year ended 31 December 2021 for G8 Education Limited. Yours sincerely Tracey Wood Ch
Slide 2: 2021 Full Year Result Investor Presentation
2021 FULL YEAR RESULT Investor Presentation 22 February 2022 G8 EDUCATION LTD ASX: GEM 1
Slide 3: Disclaimer
DISCLAIMER 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 conjunction with G8’s other peri
Slide 4: Acknowledgement of traditional owners
We would like to acknowledge the traditional owners of the land on which we meet and also acknowledge the elders past, present and emerging. We ask all people that walk, work and live on traditional Aboriginal lands, to be respectful of culture and traditions and work, learn and grow as a united com
Slide 5: Agenda
AGENDA CY21 HIGHLIGHTS Gary Carroll OPERATING AND FINANCIAL PERFORMANCE Sharyn Williams MEDIUM TERM OUTLOOK AND STRATEGY Gary Carroll CURRENT TRADING Gary Carroll Q&A Gary Carroll & Sharyn Williams APPENDIX 4
Slide 6: CY21 Highlights
CY21 HIGHLIGHTS
Slide 7: Financial Summary
FINANCIAL SUMMARY Performance measured against “pre COVID-19” CY19 CY20 $M CY21 Restated1 CY19 CY21 vs CY19 Metrics Occupancy (Core2) 70.9% 67.8% 73.0% (2.1%) Operating Revenue3 866.3 777.1 918.9 (5.7%) Statutory NPAT 45.7 (189.0) 52.0 (12.1%) Basic earnings / (loss) (cps) 5.4 (25.4) 10.0 (46.1%) Ne
Slide 8: Focused Strategy Delivering Results
FOCUSED STRATEGY DELIVERING RESULTS Momentum has the Group well positioned for sector recovery Execution Financial strength Network optimisation Strong structural support Strategic priorities, Strong balance Network optimisation Strong long-term with Improvement sheet provides resilience; program pr
Slide 9: Group Progressing Towards Medium Term Targets
GROUP PROGRESSING TOWARDS MEDIUM TERM TARGETS Positive momentum in key occupancy lead indicators Quality 1 Total portfolio Assessed centres 2 Net (NQF) 92% promoter 65 87% 95% score 76% 85% 86% (NPS) 52 46 Core 81% 35 occupancy CY19 CY20 CY21 Target 81% CY19 CY20 CY21 Target Team Centre manager Enqu
Slide 10: Improvement Program Delivering
IMPROVEMENT PROGRAM DELIVERING Increases in Occupancy lead indicators - Quality, Team Engagement and NPS 100% of IP CY21 investment - $3.5m Opex and $4.7m Capex centres Meeting/ Exceeding NQS1 Learning Resources Environments Tools and training Team Engagement2 Centre “Field” +6pts Support Practice P
Slide 11: Drivers of Group Momentum
DRIVERS OF GROUP MOMENTUM Lead indicators supportive of occupancy uplift • As part of the Improvement Program (IP), learning environments and practices were refreshed delivering 100% 1 ‘Meeting' or 'Exceeding’ in Quality Area 1 (educational program and practices) Quality • Property investment totall
Slide 12: Environment, Sustainability & Governance
ENVIRONMENT, SUSTAINABILITY & GOVERNANCE Targeting continuous improvement Our sustainability achievements1 What’s next for sustainability ✓ 92% 'Meeting' or 'Exceeding’ rating for centres • Continuous improvement approach assessed under the National Quality to sustainability - reporting to align wit
Slide 13: Operating and Financial Performance
OPERATING AND FINANCIAL PERFORMANCE
Slide 14: Operating and Financial Performance
OPERATING AND FINANCIAL PERFORMANCE • Occupancy in the first half narrowed the gap on CY19, disrupted in the second half due to the resurgence of COVID-19 • Geographic portfolio diversification, provided some insulation against lockdowns and isolation requirements with regional centres outperforming
Slide 15: Operating Performance
OPERATING PERFORMANCE CY20 CY19 vs $M CY21 CY19 Restated CY21 • Core centre revenue impacted vs CY19 by lower bookings ($50m) and Core Centres divested centres ($48m) partially offset by higher net fees ($16m) and No. of centres 429 454 482 (11.0%) temporary COVID-19 government support ($20m) No. of
Slide 16: Core Occupancy Trend
CORE1 OCCUPANCY TREND • Occupancy in the first half narrowed the gap on CY19, driven by the strategic change programs and re- establishment of the seasonal uplift trend Monthly Core1 • H1 occupancy recovery disrupted in H2 due to resurgence Occupancy (%) in COVID-19 impacts that reduced attendances
Slide 17: Core Occupancy
CORE1 OCCUPANCY Regional outperformance maintained Occupancy by region • Geographic portfolio diversification, with limited CBD exposure, provided some insulation against Core Average Occupancy lockdowns and isolation requirements CY21 v Licenced Region CY21 CY20 CY19 CY21 v CY19 Centres CY20 Places
Slide 18: Wage Optimisation
WAGE OPTIMISATION Wages managed to attendance levels • Improved systems, training and processes relating to Wage hours per booking by fortnight award compliance have resulted in positive wage performance • Improvements in efficiency were achieved despite lower occupancy levels with CY21 WHB at CY20
Slide 19: Greenfields
GREENFIELDS Changing portfolio shape in CY22 reflecting mature centre exits and openings • Refreshed Greenfield approach to further enhance the centre Greenfield Occupancy (as at 31 December 2021) CY21 performance network - New centre openings subject to robust market assessment 1 CY21 average occup
Slide 20: Impaired Centres
IMPAIRED CENTRES Divestment program progressing • Portfolio optimisation progress was slowed by COVID-19 1 19 centres divested during the year • 19 of the 52 impaired centres have been either divested, leases surrendered or conditional, indicative agreements are in place • On a statutory basis, the
Slide 21: Network Support
NETWORK SUPPORT Supporting improved centre outcomes in Engagement, NPS and Quality Field-based and Centre Support centralised teams working closely with the centres across Improvement Program (IP) Network Support Investment pedagogy, Workforce Optimisation/Compliance operations, Study Pathways Progr
Slide 22: Cash Conversion
CASH CONVERSION Managed well with timing impacts EBITDA to Cash Flow Conversion CY20 CY19 • Cash conversion strong at 107% $M CY21 Restated Restated Operating cash flow 84.3 185.4 154 • Reduction in Gross operating cash flow driven + Net interest 11.1 18.5 23.9 predominantly by lower EBITDA and timi
Slide 23: Capex
CAPEX Property Investment driving uplift in occupancy lead indicators Total CY21 Capex1 = $47.4 million • Total CY21 capex of c. $47.4m excludes $6.9m in software development costs that previously would have been capitalised • Expected CY22 Capex (including SaaS) of $65m with $10m in property works
Slide 24: Funding and Capital Management
FUNDING AND CAPITAL MANAGEMENT Strong balance sheet Dividend Sources of funding and liquidity remain strong • CY21 fully franked dividend of 3.0 cents per share declared, to • Net debt position of $26m at end of CY21, with $300m of undrawn be paid in April 2022 funds • Represents 56% payout of CY21
Slide 25: Medium Term Outlook and Strategy
MEDIUM TERM OUTLOOK AND STRATEGY
Slide 26: Strong Fundamentals Driving Long Term Demand
STRONG FUNDAMENTALS DRIVING LONG TERM DEMAND Recognising the critical role of ECEC to families, society and the economy POSITIVE DEMAND SIGNALS STRONG BI-PARTISAN SUPPORT SECTOR CHALLENGES • Extensive and growing body of research supportive of the • ECEC sector recognised, particularly during the •
Slide 27: Strategic Direction
STRATEGIC DIRECTION Evolving to fulfill G8’s purpose to create the foundations for learning for life • Creating great teams remains a key strategic priority, recognising that educators are at the heart of delivering the highest quality learning and care offering to children • Changing workforce and
Slide 28: Key Strategic Programs CY22
KEY STRATEGIC PROGRAMS CY22 Focus on quality and creating great teams to drive performance Program and Description Team & child Quality & safety Safety first culture to drive continued improvement in child and team safety and wellbeing Experience Improvement Improvement Program Dedicated support and
Slide 29: Current Trading and Outlook
CURRENT TRADING AND OUTLOOK
Slide 30: COVID-19 Impacts
COVID-19 IMPACTS Looking after team and families Jul – Sep Oct – Mid Nov Mid Nov – Current Widespread lockdown Initial reopening in NSW, Omicron – Restrictions VIC, QLD reinstated to initial easing Centre closures by month (as at 17/2/22) • Downside risk to earnings, • Centres re-opened as states •
Slide 31: Current Trading & Outlook
CURRENT TRADING & OUTLOOK • Strong sector fundamentals remain with ongoing government support, increasing female workforce participation and a growing awareness of the benefits of early learning and education on life outcomes for children • Across the sector however, there are near-term COVID-19 hea
Slide 32: Q&A
Q&A
Slide 33: Appendix
APPENDIX () G8 Education
Slide 34: G8 Is a Market Leader
G8 IS A MARKET LEADER 448 CENTRES AUSTRALIA’S LARGEST Diversified geographic footprint across Listed Early Childhood Education & Care (ECEC) provider Australia 37K+ Licensed places across Australia 68 8K+ Early Childhood Educators 39 26 167 50K+ 9 Children per week 0 139 $126 Average daily fee 33
Slide 35: Introducing Leor & Kiddo
INTRODUCING LEOR & KIDDO • Leor is a home based education and care service founded in 2018 to give children access to early • Kiddo is an on demand in-home care platform for childhood education in the home parents and a community of carers to instantly match Overview • Leor has supported many childr
Slide 36: Half Yearly Core Occupancy
HALF YEARLY CORE OCCUPANCY 35
Slide 37: Supply / Demand Dynamics
SUPPLY / DEMAND DYNAMICS Macro Supply – Net New Centre Openings2 • LDC net supply annualised growth was 3.09% (vs 3.72% in CY20) • Unemployment levels have decreased from 6.6% to 4.2% from December 2020 to December 20211 • Temporary impact of no net overseas migration stemming from the Number of Cen
Slide 38: Financial Overview
FINANCIAL OVERVIEW Financials versus “pre-COVID-19” CY19 • Revenues were impacted by parent gap fee waivers to $M CY21 CY20 Restated1 CY19 CY21 vs. CY19 support families (where children did not attend due to COVID-19) combined with the seasonal uplift trend not Total Operating Revenue 866.3 777.1 91
Slide 39: Balance Sheet
Restated $M 31 December 2021 31 December 2020 BALANCE SHEET ASSETS Current assets Cash and cash equivalents 74.1 317.0 Trade and other receivables 19.6 17.4 Other current assets 12.3 10.3 • Cash and cash equivalents of $74m, a reduction of $243m Current tax asset Total current assets 17.6 123.6 - 34
Slide 40: Cash Flow
CASH FLOW • CY21 cashflows were neutral prior to the wage remediation CY20 CY21 vs. payments of c. $38m $M CY21 Restated CY19 CY19 Cash flows from operating activities • Operating cashflows of $84.3m, a decrease of 45% on CY19 Receipts from customers (inclusive of GST) 868.5 785.4 923.1 (5.9%) Payme
Slide 41: Update on COVID-19 Government Support
UPDATE ON COVID-19 GOVERNMENT SUPPORT Gap fee waivers and increased allowable absences Gap Fee Waiver Allowable absences • Until 30 June 2022, services can waive the gap fee and retain the CCS if a child is unable to Families have 52 allowable absences in FY22 attend care for one of four reasons: •