Slide 1: ASX Announcement
ASX Announcement G8 Education Limited (ASX:GEM) 24 August 2020 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 2020 for G8 Education Limited. Yours sincerely Tracey Wood General
Slide 2: 2020 Half Year Results Investor Presentation
2020 HALF YEAR RESULTS Investor Presentation 24 August 2020 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 G8 EDUCATION LIMITED ASX: GEM COVID-19 IMPACTS & PERFORMANCE Gary Carroll HALF YEAR RESULTS Sharyn Williams STRATEGY & OUTLOOK Gary Carroll Q&A Gary Carroll & Sharyn Williams APPENDIX 3
Slide 5: Executive Summary
EXECUTIVE SUMMARY Government support and agile response to COVID-19 • The pandemic initially led families to withdraw children from care due to health and safety concerns, changes in working arrangements and unemployment • Childcare centres remained open as an essential part of the Government’s resp
Slide 6: Executive Summary
EXECUTIVE SUMMARY Achieved cash preservation targets, with robust balance sheet • Statutory loss of $239m, driven by a non-cash impairment expense of $237m as announced on 11 June 2020 • Underlying EBIT of $29m reflects the net effect of COVID-19 and Government support Half Year • Raised $301 millio
Slide 7: Executive Summary
EXECUTIVE SUMMARY Dedicated centre improvement team in place and portfolio review complete • Current occupancy is 69% with attended occupancy 50% • G8’s national footprint provides a degree of portfolio diversification protection, with COVID- 19 impacts varying by region/State • The Acceleration Pro
Slide 8: COVID-19 Impacts & Performance
COVID-19 IMPACTS & PERFORMANCE Gary Carroll
Slide 9: COVID-19 Operational Response & Actions
COVID-19 OPERATIONAL RESPONSE & ACTIONS G8 provides an essential service to the Australian community and economy The safety and wellbeing of its children and team members has been G8's priority Child and • Implemented increased infection control measures and hygiene practices and provided mental wel
Slide 10: COVID-19 Financial Impacts
COVID-19 FINANCIAL IMPACTS Subsidies and financial management • Phase 1 - Early Childhood Education & Care Relief Package revenue - $89.3m in H1 Revenue • Phase 2 and 3 - Transition Payment revenue - $51m expected in H2 • Optimised rostering to take account of changing attendance levels and JobKeepe
Slide 11: Occupancy Trends
OCCUPANCY TRENDS COVID-19 impacts occupancy Monthly Like-for-Like Occupancy (%) Occupancy Improvement from February* base (%) Free Childcare COVID impact CCS reinstated • Q1 - occupancy reduced as parents withdrew children from care or • Occupancy fell below the usual season low in February but has
Slide 12: Attendance Trends
ATTENDANCE TRENDS Closely correlated to COVID case numbers Booked weekly occupancy, attendance (%) and reported Booked weekly occupancy, attendance (%) and reported new COVID cases – National excluding Victoria new COVID cases – Victoria Only 80% Booked Attended Reported COVID Cases 4,000 80% Booked
Slide 13: Wage Management
WAGE MANAGEMENT Effective rostering to manage "free" child care period Change in attendance and wages1 from Base Fortnight2 (%) 80% • Wage cost growth was lower relative to the rapid increase in 65% attendance levels during the "free" child care period of 5 April to 12 July 60% % movement from base
Slide 14: Half Year Results
HALF YEAR RESULTS Sharyn Williams
Slide 15: CY20 H1 Snapshot
CY20 H1 SNAPSHOT Statutory and Pre-AASB16 results CY20 H1 CY20 H1 CY19 H1 CY19 H1 Proforma % 1H20 Financial Results $M Statutory Proforma^ Statutory Proforma^ change • Statutory loss after tax of $239m, was materially impacted Total Revenue 308.6 308.3 430.6 430.6 (28.4%) by a non-cash impairment ex
Slide 16: Operating Performance
$M CY20 H1 CY19 H1 % change OPERATING PERFORMANCE Total Organic Revenue 255.5 354.5 (27.9%) Wages (183.9) (198.4) (7.3%) Wage subsidies 57.4 0.0 - • Revenue and costs were underpinned by government Rent Depreciation (42.8) (8.3) (42.7) (7.4) 0.3% 12.8% support with CY20 H1 subsidies totalling $176m
Slide 17: 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 model $M 1H20 1H19 • Cash conversion ratio of 98% achieved despite the timing differences of JobKeeper net subsidy p
Slide 18: Capital Management
CAPITAL MANAGEMENT Equity Raise Debt Facilities • Completed underwritten $301m equity raising via an • Waiver relaxations of banking covenants have been extended institutional placement and retail and institutional further until December 2021 entitlement offers, significantly reducing the leverage o
Slide 19: Gearing Ratios
GEARING RATIOS Strong balance sheet and prudent gearing Gearing Ratios – Pre-AASB 16 • Net debt reduced to $57m with net proceeds from the equity raised used to reduce net debt Proforma Proforma $M CY20 H1 CY19 • Strong lender support with amendments of bank covenants in Non-current borrowings 293.9
Slide 20: Return on Capital
RETURN ON CAPITAL • Return on capital employed (ROCE) of 8.5% driven by: Return on Capital Employed – Pre-AASB 16 Proforma Proforma o Reduced earnings driven by COVID impact CY20 H1 CY19 $M o Increased equity following recent capital raise Underlying EBIT (last 12 months) 109.6 132.5 Shareholders' e
Slide 21: Strategy & Outlook
STRATEGY & OUTLOOK Gary Carroll
Slide 22: 2020 Priorities
2020 PRIORITIES Deliver consistent high-quality education programs and family experience • Dedicated team focused on turnaround opportunities and driving performance, with learning environments and people capability build activities undertaken for 108 centres in H1 Quality, safety and • Second half
Slide 23: Portfolio Review
PORTFOLIO REVIEW • Strategic portfolio review has been completed and contributed $82m post tax towards the non-cash impairment, relating to right of use assets and PP&E for 52 centres • The portfolio, excluding these centres, is higher quality in terms of occupancy, NQS ratings and financial perform
Slide 24: Greenfield Model
GREENFIELD MODEL Creating a portfolio of first choice centres • G8’s committed greenfield pipeline has been completed following the establishment of 10 centres in CY20 H11 • A portfolio network strategy has been developed to assess and secure potential greenfield centre sites Assessment Framework AF
Slide 25: Supply / Demand Dynamics
SUPPLY / DEMAND DYNAMICS Slowing supply growth Macro Supply – Net New Centre Openings * • LDC net supply growth decreased by 68% YoY in Q2 bringing the full year annualised growth to 3.8% (vs 3.9% in CY19) 120 • Overall in H1 59 centres closed vs 66 in pcp (a 10.6% reduction). 100 27 centres closed
Slide 26: Current Trading & Outlook
CURRENT TRADING & OUTLOOK • COVID-19 impacted trading conditions are expected to continue and given this backdrop the Group will continue its disciplined approach to cost and cash management • The Acceleration Program has continued despite COVID-19, focusing on consistent high-quality education prog
Slide 27: Questions
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Slide 28: Appendix
APPENDIX
Slide 29: COVID-19 Centre Closure Statistics
COVID-19 Centre Closure Statistics H1 H21 Number of centre closures 3 7 Total days closed across all services 15 26 Average days closed per centre 5 4 Number of G8 educators with positive COVID2 5 4 Number of G8 children with positive COVID2 2 5 Number of G8 family members with positive COVID 2 14 1
Slide 30: Equity raising cashflow targets achieved
Equity raising cashflow targets achieved Ahead of expectations Summary of pro-forma monthly revenue and key cash costs ($m) Performance vs. equity raising assumptions • Cash inflows ‒ Government subsidy higher due to $11.5m paid in advance Average monthly cash inflows Average monthly key cash costs
Slide 31: Government support measures
Government support measures Strong support keeps sector viable and retains employees Phase 1 Phase 2 Phase 3 (Stage 3 or 4 lockdowns (6 Apr to 12 July) (13 Jul – 27 Sep) 13 July – TBC) Early Childhood Education & Care Relief Transition Payment Transition Payment Plus Package (ECECRP) • 25% of Refere
Slide 32: LFL Occupancy
LFL OCCUPANCY1 Half-Yearly Like-for-Like Occupancy (%) • Occupancy, down 5.9%pts on PCP, was impacted by COVID-19, with some parents withdrawing their children from care due to unemployment, working from home or safety concerns • From 6 April, childcare was free for families, resulting in a period o
Slide 33: Balance Sheet
Statutory AASB 16 Proforma Proforma BALANCE SHEET $M Jun 20 Adjust. Jun 20 Dec 19 ASSETS Current assets Cash and cash equivalents 237.5 - 237.5 40.6 • Cash and cash equivalents of $237m reflects net of Trade and other receivables 37.6 3.9 41.5 37.8 8.9 - 8.9 11.2 $301m capital raised during the peri
Slide 34: Cash Flow
CASH FLOW CY20 H1 CY20 H1 CY19 H1 CY19 H1 • Lease adjusted proforma operating cashflows of $29m, a $M Statutory Proforma Statutory Proforma decrease of 9% on prior year, included: Cash flows from Operating Activities Receipts from customers (inclusive of GST) 337.9 337.9 433.3 433.3 • ECEC revenue p
Slide 35: Capex Commitments
CAPEX COMMITMENTS Cash Preservation a Priority Total CY20 H1 Capex = $15 million • 1H20 total capex of $15m driven by: o Refurb and Refresh Program (centre capex) – circa $6m Refurb & Refresh o Educational equipment/resources – circa $4m (centres) o Project capex (e.g. rostering system and turnaroun
Slide 36: Pathway to Portfolio Optimisation
PATHWAY TO PORTFOLIO OPTIMISATION Divestments and centre closures optimising portfolio quality • A share sale agreement to divest Singapore operations has Centre Portfolio been entered into • Completion is expected to occur in 2H20 subject to satisfaction of conditions precedent, including regulator
Slide 37: CY17 & CY18 Greenfield Performance
CY17 & CY18 GREENFIELD PERFORMANCE CY17 Greenfields Cohort – Weekly Occupancy CY18 Greenfields Cohort – Weekly Occupancy • Achieving target occupancy at a portfolio level • Occupancy of portfolio is on track, consistent with CY17 • Continuing occupancy growth as centres mature cohort trends 36
Slide 38: CY19 Greenfield Performance Occupancy by State
CY19 GREENFIELD PERFORMANCE OCCUPANCY BY STATE CY19 Greenfields Cohort – Weekly Occupancy Half-Yearly Like-for-Like Occupancy (%) • Achieving target occupancy at a portfolio level • Continuing occupancy growth as centres mature 37
Slide 39: Wage Efficiency
WAGE EFFICIENCY Detailed roster management in response to fluctuating occupancy and attendance levels Wage hours per booking by fortnight 2019 2020 Fortnight 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 38
Slide 40: AASB 16 Leases Impact on Consolidated Income Statement
AASB 16 Leases Impact on Consolidated Income Statement (Unaudited, Non IFRS) 30 June 2020 30 June 2020 30 June 2020 30 June 2019 30 June 2019 30 June 2019 AASB16 Statutory AASB16 Adjustment pre-AASB16 Statutory pre-AASB16 Adjustment Consolidated Half Year #039;000 #039;000 #039;000 #039;000 #039;000 #039;000 Revenue
Slide 41: AASB 16 Leases Impact on Consolidated Balance Sheet
30 June 2020 30 June 2020 30 June 2020 31 December 2019 31 December 2019 31 December 2019 AASB 16 Leases Statutory AASB16 Adjustment pre-AASB16 Statutory AASB16 Adjustment pre-AASB16 Impact on Consolidated half-year ASSETS #039;000 #039;000 #039;000 #039;000 #039;000 #039;000 Consolidated Current assets Cash and cash
Slide 42: AASB 16 Leases Impact on Consolidated Cash Flows
AASB 16 Leases Impact on Consolidated Cash Flows (Unaudited, Non IFRS) 30 June 2020 30 June 2020 30 June 2020 30 June 2019 30 June 2019 30 June 2019 AASB16 AASB16 Statutory pre-AASB16 Statutory pre-AASB16 Adjustment Adjustment Consolidated half-year #039;000 #039;000 #039;000 #039;000 #039;000 #039;000 Cash flows fro