G8 Education Limited · ASX:GEM
G8 Education — Investor Presentation (August 2021)
39 slides from G8 Education's investor presentation, Aug 23, 2021
Slide 1: ASX Announcement
ASX Announcement G8 Education Limited (ASX:GEM) 23 August 2021 The Manager Market Announcements Office ASX Limited 20 Bridge Street Sydney NSW 2000 Dear Sir / Madam I enclose the Investor Presentation for the half year ended 30 June 2021 for G8 Education Limited, which includes a trading update and
Slide 2: 2021 Half Year Result Investor Presentation
2021 HALF YEAR RESULT Investor Presentation 23 August 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 HALF YEAR RESULTS Sharyn Williams KEY PROGRAM UPDATE Gary Carroll CURRENT TRADING & OUTLOOK Gary Carroll Q&A Gary Carroll & Sharyn Williams APPENDIX 3
Slide 5: Overview & CEO Commentary
OVERVIEW & CEO COMMENTARY ‘ A % _ ay ’ A as / ad * ij ing au 7 vr a& 7 | $¢ oe: p i 4 om AOR ish | aide. SF es
Slide 6: Group is well positioned
GROUP IS WELL POSITIONED Strategic programs delivering strong momentum and tangible results Demonstrated resilience and discipline to help mitigate impacts of an uncertain environment Strong balance sheet with conservative leverage position Investing in the future, particularly in family and team re
Slide 7: CY21 H1 Highlights
CY21 H1 HIGHLIGHTS Strong execution and positive momentum in strategic initiatives 98% of Centres Operating EBIT1 Occupancy Assessed in H1 (after lease narrowed the gap Net cash $6.5m achieved interest) of on CY19 'Meeting' or $38.9m, in line 'Exceeding' NQF with CY19 H1 CY19 & CY20 Greenfields Rost
Slide 8: Quality, Community & Sustainability
QUALITY, COMMUNITY & SUSTAINABILITY Is at the heart of our business What we achieved in H1 CY20 H2 Materiality • Delivered our highest National Quality Standard (NQS) result Assessment with over 98% of centres assessed in CY21 H1 having achieved completed 'Meeting' or 'Exceeding’ rating • Developed
Slide 9: Financial Summary
FINANCIAL SUMMARY Performance measured against “pre COVID” CY19 H11 $M CY21 H1 CY20 H1Restated1 CY19 H1 Restated1 CY21 H1 vs. CY19 H1 Metrics Occupancy (Core2) 68.0% 65.1% 70.4% (2.4%) pts Operating Revenue3 421.5 308.2 429.9 (2.0%) Statutory NPAT 25.1 (244.1) 13.7 83.2% Basic earnings / (loss) (cps
Slide 10: Core Occupancy Trends
CORE1 OCCUPANCY TRENDS Seasonal growth trend reinstated in H1 • Occupancy in the first half continued to narrow the Monthly Core Occupancy (%) gap on CY19, driven by our strategic change programs and the seasonal uplift trend being re- established • Post-June this seasonal trend has been disrupted i
Slide 11: Core Occupancy
CORE1 OCCUPANCY Regional centres outperforming Occupancy by region • National CY20 H1 core occupancy of 68.0%, Core Average Occupancy 2.4%pts lower than CY19 H1 CY21 H1 v CY21 H1 v Licenced Region CY21 H1 CY20 H1 CY19 H1 Centres CY20 H1 CY19 Places • Geographic portfolio diversification, with limite
Slide 12: Wage Optimisation
WAGE OPTIMISATION Wage outperformance enabling further investment in quality care • 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
Slide 13: Greenfield Centres
GREENFIELD CENTRES Greenfield centres continue to build occupancy Greenfields Greenfield Occupancy (as at 30 June 2021) 1 71% average occupancy Centres reviewed $3m NPBT turnaround to annually for inclusion 2 $0.7m, from a $2.3m loss in Ramp-up trendline into the Core portfolio CY20 H1 CBD centre 6
Slide 14: Impaired Centres
IMPAIRED CENTRES Divestment program on track • The property portfolio optimisation is progressing well with half of the 52 impaired centres either 6 centres divested, 6 surrendered divested, leases surrendered or conditional, indicative agreements in place 1 during the half • On a statutory basis, t
Slide 15: Half Year Results
HALF YEAR RESULTS
Slide 16: Financial Impacts
FINANCIAL IMPACTS • Operating performance continued to recover post the COVID impacted CY20 period • Victorian Covid subsidy provided a buffer for occupancy recovery and team retention • Roster optimisation and compliance activities mitigated the potential impact from wage P&L remediation • Impairme
Slide 17: Financial Overview
FINANCIAL OVERVIEW Financials versus “pre-COVID” CY19 H1 • Revenues were impacted by lower occupancy and the CY20 H1 CY19 H1 CY21 H1 vs. absence of divested centres, partially offset by $M CY21H1 Restated1 Restated1 CY19 H1 greenfield growth, the Victorian COVID subsidy and a Total Operating Revenue
Slide 18: Operating Performance
OPERATING PERFORMANCE CY20 H1 CY19 H1 CY21 H1 vs. $M CY21 H1 Restated Restated CY19 H1 • Improved Core centre earnings reflect - Roster optimisation and compliance activities are Core Centres No. of centres 444 448 484 (8.3%) mitigating prior year wage remediation costs No. of LP 36,884 37,005 39,24
Slide 19: Network Support
NETWORK SUPPORT Supporting our teams and network to be the centre of choice for families Field-based teams Centre Support working closely with the centres across pedagogy, Improvement Program (IP) Network Support Investment operations, Workforce Optimisation/Compliance compliance, safety Study Pathw
Slide 20: Financial Impacts
FINANCIAL IMPACTS • Strong balance sheet, net cash position of $6.5m • Debt refinance completed in February 2021 delivered lower interest costs, increased flexibility Cashflow and increased tenor & Capital • Dividend payments expected to recommence with a full-year CY21 dividend intended to be paid
Slide 21: Capital Management
CAPITAL MANAGEMENT Sources of funding and liquidity remain strong Total CY21 H1 Capex = $20.2 million • February 2021 refinance of debt facilities maintains a staggered debt profile and includes sustainability-linked performance targets Centre Improvements • CY21 net finance costs (excluding lease i
Slide 22: Cash Flow
CASH FLOW • Operating cashflows of $48.4m, a decrease of 23% on CY19 or CY21H1 vs. 6% excluding material timing differences and the benefit from $M CY21H1 CY20H1 CY19H1 CY19H1 Cash flows from operating activities lower interest Receipts from customers (inclusive of GST) 426.0 337.9 433.3 (1.7%) Paym
Slide 23: Cash Conversion
CASH CONVERSION Managed well with timing impacts EBITDA to Cash Flow Conversion • Cash flow was well managed although was impacted by the CY20H1 CY19H1 timing of items such as rent relief unwinding from CY20 $M CY21H1 Restated Restated ($1.5m), settlement of payroll and creditor accruals from Operat
Slide 24: Key Program Update
KEY PROGRAM UPDATE
Slide 25: Improvement Program Driving Strong Outcomes
IMPROVEMENT PROGRAM DRIVING STRONG OUTCOMES Underpinned by breadth and depth of Centre Support team Total investment to date - $3.9m Opex and $5.6m Capex 224 Centres Learning Resources 106 (CY19/20) Centre “Field” Tools and training Environments 118 (1H21) Support EBIT Uplift Practice Partners $1.5m
Slide 26: Strategic Program Update
STRATEGIC PROGRAM UPDATE • Improving the support provided to centre team members and recognising the incredible role they perform for our families is of paramount importance. There’s a lot more to do and this is the number one strategic priority Quality & • The Improvement Program (IP) is on track t
Slide 27: Employee Payments Remediation Program
EMPLOYEE PAYMENTS REMEDIATION PROGRAM • The employee payments remediation program announced on 8 December 2020 is progressing well • An initial payment of approximately $17 million was made in mid-July 2021 to 8,388 current impacted team members. A second payment will be made to current team members
Slide 28: Current Trading & Outlook
CURRENT TRADING & OUTLOOK
Slide 29: COVID Impacts
COVID IMPACTS Looking after team and families Booked weekly occupancy, attendance (%) and reported new COVID cases • COVID-related movement restrictions continue to impact revenue with National $1.9m of fees waived in H1 to support families and retain enrolments - Currently, the provider funds these
Slide 30: Current Trading & Outlook
CURRENT TRADING & OUTLOOK • Occupancy recovery was on an encouraging trajectory in H1. Recent lockdowns have impacted the seasonal trend in H2 with the progressively stricter lockdowns expected to weigh on attendances in several states - The gap on CY19 core occupancy narrowed to 1% pt in early July
Slide 31: Q&A
Q&A
Slide 32: Appendix
APPENDIX
Slide 33: COVID-19 Affordability Measures
COVID-19 AFFORDABILITY MEASURES Supporting our families and retaining enrolments Gap Fee waivers Fee discounts • Parent “gap” fee portion is waived, and the CCS • G8 has applied a 35% fee discount portion continues to be paid where families have kept children at Parent • Parent “gap” fees can vary b
Slide 34: Supply / Demand Dynamics
SUPPLY / DEMAND DYNAMICS Macro Supply – Net New Centre Openings2 • LDC net supply annualised growth was 3.7% (vs 3.8% in CY20) • Unemployment levels have decreased from 6.6% to 4.9% from December 2020 to June 20211 • The recent 2021 Intergenerational Report highlighted the expected Number of Centres
Slide 35: Half Yearly Core Occupancy
HALF YEARLY CORE OCCUPANCY 34
Slide 36: Balance Sheet
BALANCE SHEET $M 30 June 2021 31 December 2020 ASSETS Current assets Cash and cash equivalents 106.5 317.0 • Cash and cash equivalents of $106.5m, a reduction of Trade and other receivables 13.8 17.4 $211m due to a voluntary $200m repayment of borrowings Other current assets Current tax asset 12.6 4
Slide 37: Gearing Ratios & Capital Returns
GEARING RATIOS & CAPITAL RETURNS Strong balance sheet, prudent gearing and solid returns Gearing Ratios Return on Capital Employed $M CY21 H1 CY20 CY21 H1 CY20 H1 Non-current borrowings 94.9 295.1 $M Cash and cash equivalents (106.5) (317.0) Operating EBIT (after lease interest)6 119.9 77.7 Net (Cas
Slide 38: Half Year Operating EBIT (after lease interest) Reconciliation
Half Year Operating EBIT (after lease interest) Reconciliation AASB 16 Leases Impact on Consolidated Income Statement (Unaudited, Non IFRS) 30-Jun-20 30-Jun-20 30-Jun-20 30-Jun-20 30-Jun-19 30-Jun-19 30-Jun-19 Statutory AASB16 Adjustment AASB16 Impairment pre-AASB16 Statutory AASB16 Adjustment pre-A
Slide 39: Full Year Operating EBIT (after lease interest) & Recategorisation
Full Year Operating EBIT (after lease interest) & Recategorisation 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 Adj