G8 Education Limited · ASX:GEM
G8 Education — FY2020 Earnings Presentation
38 slides from G8 Education's earnings presentation, Feb 23, 2021
Slide 1: ASX Announcement
ASX Announcement G8 Education Limited (ASX:GEM) 23 February 2021 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 2020 for G8 Education Limited. Yours sincerely Tracey Wood Ch
Slide 2: 2020 Full Year Result Investor Presentation
2020 FULL YEAR RESULT Investor Presentation 23 February 2021 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: Agenda
AGENDA OVERVIEW & CEO COMMENTARY Gary Carroll FULL YEAR RESULTS Sharyn Williams STRATEGY UPDATE Gary Carroll CURRENT TRADING Gary Carroll Q&A Gary Carroll & Sharyn Williams APPENDIX 3
Slide 5: Overview & CEO Commentary
OVERVIEW & CEO COMMENTARY
Slide 6: CY20 Highlights
CY20 HIGHLIGHTS Occupancy and Underlying EBIT Reinvestment of Strong balance attendance better of $105.2m1 Q4 subsidy in sheet, net cash than expected ahead of team retention $21.8m consensus and Centre quality Improved Centre Rostering Portfolio Optimisation Quality - 85% Improvement efficiency ben
Slide 7: Financial Summary
FINANCIAL SUMMARY Key Financial Results – Proforma1 • Revenue and costs were underpinned by government support and facilitated investment in centre quality and educational resources in Q4 CY20 Restated $M % change CY20 CY192 • Underlying EBIT of $105.2m, includes $12m relating to the employee paymen
Slide 8: Occupancy Trends
OCCUPANCY TRENDS Seasonal growth trend reinstated Monthly Like-for-Like Occupancy (%) • Occupancy recovered well from the April low finishing the year better than expected • The occupancy gap relative to CY19 narrowed significantly with December 1.5%pts below prior year as children remained in care
Slide 9: Occupancy by State
OCCUPANCY BY STATE Like-for-Like Occupancy (%) Supply Licenced • National CY20 LFL occupancy of 69.2% Occupancy Centres Growth Places • State-based occupancy trends were broadly consistent, with State 2019 2020 % change YoY # # the exception of Victoria (due to extended mobility ACT 78.2% 62.4% (15.
Slide 10: Wage Efficiency
WAGE EFFICIENCY Effective rostering reflected in improved efficiency Wage hours per booking by fortnight • Expected rostering benefits captured during CY20 ‒ Efficiency improvements reflected in lower wage hours per booking in CY20 relative to the same occupancy level in CY19 ‒ Relative efficiency i
Slide 11: Employee Payments Remediation Program
EMPLOYEE PAYMENTS REMEDIATION PROGRAM • The employee payments remediation program announced on 8 December 2020 remains on track, with payments to impacted team members1 expected to be substantially completed by 31 July 2021 • As announced in December 2020, total program costs were estimated at betwe
Slide 12: Full Year Results
_ FULL YEAR RESULTS
Slide 13: Financial Drivers
FINANCIAL DRIVERS • Statutory loss after tax of $187m driven by $237m non-cash impairment expense • Underlying EBIT of $105.2m, includes CY20 employment costs ($12m) relating to the employee payment remediation program P&L • Revenue and cost model impacted by various government COVID support package
Slide 14: CY20 Snapshot
CY20 SNAPSHOT Statutory and Pre-AASB16 results CY19 CY19 CY20 CY20 Statutory Proforma Proforma • Statutory loss after tax of $187m was materially impacted by a $M Statutory Proforma^ restated4 restated^4 % change non-cash impairment expense of $237m (post tax)1 787.5 787.2 921.7 920.1 (14.4%) Total
Slide 15: Operating Performance
OPERATING PERFORMANCE $M CY20 Restated CY19 % YoY Total Organic Revenue 613.5 720.7 (14.9%) • Underlying Group EBIT of $105.2m, down 12% on prior year Wages (394.5) (403.9) (2.3%) • Revenue and costs were underpinned by government Wage subsidies 84.9 0.0 0.0% Rent (77.2) (78.5) (1.7%) support with C
Slide 16: Financial Drivers
FINANCIAL DRIVERS • Strong balance sheet, net cash of $21.8m • $301m equity raise completed in response to COVID, significantly reducing the Group’s leverage • Debt refinance completed in February 2021 - reduces finance costs and results in average debt expiry of 3 years Cashflow & Capital • Well po
Slide 17: Cash Flow
CASH FLOW CY20 CY20 CY19 CY19 • Lease adjusted proforma operating cashflows of $131m, an $M Statutory Proforma Statutory Proforma increase on prior year, included: Cash flows from operating activities Receipts from customers (inclusive of GST) 785.4 785.4 923.1 923.1 ‒ ECEC revenue package in lieu o
Slide 18: Balance Sheet
CY19 CY19 CY20 CY20 Statutory Proforma BALANCE SHEET $M Statutory Proforma Restated Restated ASSETS Current assets Cash and cash equivalents 317.0 317.0 40.6 40.6 • Cash and cash equivalents of $317m largely offset by Trade and other receivables 17.4 20.7 29.9 37.8 borrowings of $295m, resulting in
Slide 19: Capital Management
CAPITAL MANAGEMENT Equity Raise Debt Facility Profile ($M) • Completed underwritten $301m equity raising significantly reducing the $M Group's leverage Debt Facilities Undrawn • February 2021 refinance of debt facilities maintains a staggered debt Drawn profile with next expiry date in October 2023
Slide 20: Gearing Ratios & Capital Returns
GEARING RATIOS & CAPITAL RETURNS Strong balance sheet, prudent gearing and solid returns Gearing Ratios – Lease-Adjusted Return on Capital Employed – Lease-adjusted Proforma Proforma Proforma CY19 Proforma CY19 $M CY20 Restated $M CY20 Restated Borrowings 295.1 387.8 Underlying EBIT1 105.2 119.4 Cas
Slide 21: Strategy Update
_ STRATEGY UPDATE ie)
Slide 22: Refreshed Strategic Direction
REFRESHED STRATEGIC DIRECTION Purpose • Recent strategy focused on building a scaleable Our reason for being foundation Creating the foundations for learning for life ‒ Securing scale advantages through integrating Vision onto a single set of systems e.g. Xplor for CCS, rostering etc What we want to
Slide 23: Achieving the Strategic Objectives
ACHIEVING THE STRATEGIC OBJECTIVES Key programs and measures in place to support achievement of updated strategic objectives 22
Slide 24: Greenfield Portfolio Design
GREENFIELD PORTFOLIO DESIGN Future reporting will be enhanced to include a separate view on Greenfield portfolio performance Greenfield portfolio objectives Greenfield portfolio parameters Greenfield occupancy ramp-up profile over last four years* 100% Enable separation of the Portfolio to house all
Slide 25: Current Trading
CURRENT TRADING
Slide 26: Current Trading
CURRENT TRADING • The Group expects CY21 to be a recovery year given the absence of additional government subsidies and the continued impact of COVID-19, particularly on occupancy - either directly through movement restrictions or indirectly through economic impacts such as higher unemployment • COV
Slide 27: Q&A
Q&A ie
Slide 28: Appendix
APPENDIX
Slide 29: COVID-19 Financial Impacts
COVID-19 FINANCIAL IMPACTS Subsidies and financial management • Phase 1 - Early Childhood Education & Care Relief Package revenue - $100.8m CY20 Revenue • Phase 2 and 3 - Transition Payment revenue - $59.4m expected in CY20 ($5.3m in CY21) • Optimised rostering to take account of changing attendance
Slide 30: Government Support
GOVERNMENT SUPPORT Strong support keeps sector viable, retains employees & highlights resilience of ECEC Phase 1 Phase 2 Victorian Phase 3 Lockdown (6 Apr to 12 July) (13 Jul – 27 Sep) (13 July – 31 Dec) (28 Sep – 31 Jan) Relief Package Transition Package Transition Payment Plus Recovery Package - V
Slide 31: Occupancy & Attendance Trends
OCCUPANCY & ATTENDANCE TRENDS COVID-19 impacts occupancy Booked weekly occupancy, attendance (%) and Half-Yearly Like-for-Like Occupancy (%) reported new COVID cases – National 1. Occupancy restated to allow for a like-for-like comparison • Both H1 and H2 were c. 6%pts lower than prior year • COVID-
Slide 32: G8 Is a Market Leader
G8 IS A MARKET LEADER With significant competitive advantages 472 CENTRES AUSTRALIA’S LARGEST Diversified geographic footprint across Listed Early Childhood Education & Care (ECEC) provider Australia 39K+ Licensed places across Australia 74 8K+ Early Childhood Educators 38 28 182 46K 9 Children per
Slide 33: Supply / Demand Dynamics
SUPPLY / DEMAND DYNAMICS New centre opening increase, offsetting H1 reduced growth Macro Supply – Net New Centre Openings2 • LDC net supply annualised growth increased to 3.7% (vs 4.2% in CY19), the decrease in net new centres in Q2 offset in Q3 and Q4. • Unemployment levels have decreased from 7.5%
Slide 34: Cash Conversion
CASH CONVERSION Consistent and strong cash conversion EBITDA to Cash Flow Conversion – Pre-AASB 16 • Cash flow generation remained strong in CY20 as G8 adapted to the COVID-19 funding models CY19 CY20 Proforma • In future reporting periods, the cash flow conversion $M Proforma Restated table will re
Slide 35: AASB 16 Leases Impact on Consolidated Income Statement
AASB 16 Leases Impact on Consolidated Income Statement (Unaudited, Non IFRS) 31-Dec-20 31-Dec-20 31-Dec-20 31-Dec-20 31-Dec-19 31-Dec-19 31-Dec-19 Statutory AASB16 Adjustment AASB16 Impairment pre-AASB16 Restated Statutory AASB16 Adjustment pre-AASB16 Consolidated Full Year $'000 $'000 $'000 $'000 $
Slide 36: Reconciliation to Underlying Results
Reconciliation to Underlying Results (Unaudited, Non IFRS) 2020 2019 pre-AASB16 Restated pre-AASB16 Consolidated Full Year $'000 $'000 Net Profit / (loss) after income tax (Pre-AASB 16) (114,177) 60,716 Add/(Less) non-operating transactions: Contingent consideration not paid (64) (681) Acquisition r
Slide 37: AASB 16 Leases Impact on Consolidated Balance Sheet
31-Dec-20 31-Dec-20 31-Dec-20 31-Dec-19 31-Dec-19 31-Dec-19 AASB 16 Leases Statutory AASB16 Adjustment pre-AASB16 Restated Statutory AASB16 Adjustment pre-AASB16 Impact on Consolidated Full Year $'000 $'000 $'000 $'000 $'000 $'000 ASSETS Consolidated Current assets Cash and cash equivalents 316,989
Slide 38: AASB 16 Leases Impact on Consolidated Cash Flows
AASB 16 Leases Impact on Consolidated Cash Flows (Unaudited, Non IFRS) 31-Dec-20 31-Dec-20 31-Dec-20 31-Dec-19 31-Dec-19 31-Dec-19 AASB16 AASB16 Statutory pre-AASB16 Statutory pre-AASB16 Adjustment Adjustment Consolidated Full Year $'000 $'000 $'000 $'000 $'000 $'000 Cash flows from operating activi