G8 Education Limited · ASX:GEM
G8 Education — FY2022 Earnings Presentation
36 slides from G8 Education's earnings presentation, Feb 21, 2023
Slide 1: ASX Announcement
ASX Announcement G8 Education Limited (ASX:GEM) 21 February 2023 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 2022 for G8 Education Limited. Yours sincerely Tracey Wood Ch
Slide 2: 2022 Full Year Results Investor Presentation
2022 FULL YEAR RESULTS Investor Presentation 21 February 2023 ASX: GEM 1
Slide 3: Acknowledgement of Country
G8 Education acknowledges the Traditional Owners of the lands on which we operate and pays our respects to Elders past, present and emerging. We recognise that Aboriginal and Torres Strait Islander peoples have been nurturing and teaching children on these lands for thousands of years. We are gratef
Slide 4: 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 5: Agenda
AGENDA CY22 HIGHLIGHTS Pejman Okhovat OPERATING AND FINANCIAL PERFORMANCE Sharyn Williams MEDIUM TERM OUTLOOK, STRATEGY AND CURRENT TRADING Pejman Okhovat Q&A Pejman Okhovat & Sharyn Williams APPENDIX 4
Slide 6: Introduction
INTRODUCTION ABOUT PEJMAN Pejman Okhovat • Over 29 years of leadership and executive experience across a CEO & Managing Director number of well-known organisations in Australia and internationally, including as the Managing Director of BIG W, Chief Executive Officer of NZX-listed retailer The Wareho
Slide 7: CY22 Highlights
CY22 HIGHLIGHTS 6
Slide 8: CY22 Overview
CY22 OVERVIEW A year of stabilisation, leveraging the foundation H1 – COVID and flood H2 – Solid rebound CY22 Solid result supported by impacted stronger H2 Core occupancy1 - 71% Core occupancy1 0.9%pts Core occupancy1 1.0%pts Operating EBIT2 - $80.3m Operating EBIT2 46.2% Operating EBIT2 44.3% Driv
Slide 9: Financial Summary
FINANCIAL SUMMARY • Modest revenue growth driven by H2 recovery in occupancy and $M CY22 CY21 Change fee increases Revenue 901.3 866.3 4.0% • Operating EBITDA1 growth of 5.2% was underpinned by Statutory NPAT 36.6 45.7 (19.9%) disciplined cost control, including the cost out program and solid Basic
Slide 10: Drivers of Group Momentum
DRIVERS OF GROUP MOMENTUM Solid results in a challenging environment Leading contributing factors Sustainable outcomes Increasing More Pursuing Increasing Strong enquiries >80% stable Optimising + + & sector operational + + = high & higher network engaged location quality demand execution family occ
Slide 11: Drivers of Group Momentum
DRIVERS OF GROUP MOMENTUM Solid results in a challenging environment Leading contributing factors Sustainable outcomes More Increasing Pursuing Increasing Strong enquiries >80% stable Optimising operational & sector & higher + high + + + = engaged network location execution quality demand family occ
Slide 12: Environment, Social & Governance
ENVIRONMENT, SOCIAL & GOVERNANCE Targeting continuous improvement Our sustainability achievements (CY22) What’s next for sustainability ✓ Centre Quality - 89% 'Meeting' or 'Exceeding’ the Below are the key next steps which build upon the National Quality Standard (NQS) network wide, a important work
Slide 13: Operating and Financial Performance
OPERATING AND FINANCIAL PERFORMANCE 12
Slide 14: Operating and Financial Performance Takeaways
OPERATING AND FINANCIAL PERFORMANCE Result reflects an improved H2 • Stronger centre performance in H2 reflects occupancy seasonal trends and continued recovery towards CY19 levels KEY • Regional centres continue to perform well, outperforming both CY21 and CY19 however Metropolitan centres below bo
Slide 15: Operating Performance
OPERATING PERFORMANCE $M CY22 CY21 Change • Core centre revenue growth driven by higher average fees and H2 Core Centres No. of centres 422 432 -3.7% recovery in occupancy from Q2 low No. of LP 35,015 35,367 -2.3% • Core centre margins broadly in line with CY21 driven by Core Revenue 871.2 828.0 5.2
Slide 16: Core Occupancy
CORE1 OCCUPANCY Weekly Core1 Occupancy (%) Core1 Occupancy by Half (%) 85% H1 H2 CY CY19 160% 90% 80% 73% CY21 140% 71% 71% 80% 70% CY22 120% 75% 76% 60% 100% 74% 75% 50% 80% 70% 40% 60% 30% 65% 40% 70% 68% 67% 20% 20% 10% 60% 0% 0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47
Slide 17: Wage Efficiency
WAGE EFFICIENCY Wages managed well in a challenging environment • Solid wage performance throughout CY22 reflects new Wage hours per booking by fortnight HRIS system, centralised wage support and centre work routines • Wage efficiencies continued to be realised in line with occupancy recovery in H2,
Slide 18: Network Update
NETWORK UPDATE Portfolio optimisation progressing as part of BAU CY22 Greenfields Update Greenfield Occupancy (as at 31 December 2022) CY22 Divestments Update 100.0% Average occupancy – 63.8% 90.0% 2 impaired centres exited during the year and 1 1 NPBT1 $2.9m loss vs. $1.5m profit in CY21 80.0% Old
Slide 19: Cash Conversion
CASH CONVERSION Managed well with timing impacts • Lower gross operating cash flow driven predominantly by the EBITDA to Cash Flow Conversion timing of receipts, and payments of creditors and employee provisions, at year-end $M CY22 CY21 • Additional creditors carried into January 2022 due to Operat
Slide 20: Capex
CAPEX Capital Investment contributing to improved quality ratings and family satisfaction • Total CY22 capex of $58m, excludes $7m in software Total CY22 Capex1 = $58 million development costs (SaaS) • Capital investment was across 3 main areas: $5m - centre improvements Centre Improvements - centre
Slide 21: Funding and Capital Management
FUNDING AND CAPITAL MANAGEMENT Strong balance sheet Gearing Ratios Dividend • CY22 fully franked final dividend of 2.0 cents per share CY22 CY21 declared, taking total CY22 dividends to 3.0 cents per share, a $M 68% payout ratio Non-current borrowings 127.9 96.1 Cash and cash equivalents (37.8) (74.
Slide 22: Medium Term Outlook, Strategy and Current Trading
MEDIUM TERM OUTLOOK, STRATEGY AND CURRENT TRADING 21
Slide 23: Strong Fundamentals Driving Demand
STRONG FUNDAMENTALS DRIVING DEMAND Recognising the critical role of ECEC to families, society and the economy • As evidenced in the pandemic, the ECEC sector is viewed as critical to Australia’s economy and has strong bi-partisan support • Government support continues to target affordability and dri
Slide 24: Affordability Question
AFFORDABILITY QUESTION Additional funding supportive of demand but inflation remains an affordability headwind • Step change in sector “gap fees” in December quarter2, most acutely New Labour CCS Percentage Existing CCS Percentage felt in NSW, reflect inflationary pressures 90% • CCS changes via the
Slide 25: Workforce Macro Challenge
WORKFORCE MACRO CHALLENGE Multifaceted response to sector-wide issue Sector challenge Macro Response G8 Response Multi-year response underway Tertiary - Bachelor qualifications • Above Award remuneration - CM, ECT & trainee roles • All states experiencing increased vacancy rates • NSW & Vic governme
Slide 26: Regulatory Focus on ECEC - CY23 Timeline
REGULATORY FOCUS ON ECEC - CY23 TIMELINE Multiple inquiries and potential reforms will require significant focus and resource Q1 Q2 Q3 Q4 Consultation period – interim report due 30 June Final paper due 31 December Final Report: Consultation period - broad public process - commence 1 March, 2023 30
Slide 27: Current Trading & Outlook
CURRENT TRADING & OUTLOOK Trading update • Current Core1 occupancy for the last two weeks is 1.8%pts higher than CY22 and 1.5%pts lower than CY19, broadly in line with the December trading update • Fee increase of c. 6% implemented in January in response to the current inflationary environment • Wag
Slide 28: Strategic Focus – Delivering on Our Purpose
STRATEGIC FOCUS – DELIVERING ON OUR PURPOSE Focus on team and quality education leading to great experience for children and families 27
Slide 29: Q&A
Q&A CD) G8 Education"
Slide 30: Appendix
APPENDIX (<2) G8 Education"
Slide 31: G8 Is a Market Leader
G8 IS A MARKET LEADER 438 CENTRES AUSTRALIA’S LARGEST Diversified geographic footprint across Australia Listed Early Childhood Education & Care (ECEC) provider 37K+ Licensed places across Australia 62 8K+ 65 Early Childhood Educators 43 43 26 26 156 158 48K+ 8 Children per week 138 138 $140 Average
Slide 32: Core Occupancy
CORE1 OCCUPANCY Regional outperformance maintained Occupancy by region Core Average Occupancy • Easing of COVID-19 restrictions and recovery from CY22 v CY22 v Licenced floods has resulted in improved performance in H2 Region CY22 CY21 CY21 CY19 CY19 Centres Places CBD 36.6% 43.9% (7.2%)pts 74.0% (3
Slide 33: Network Support
NETWORK SUPPORT Supporting the network to achieve improved outcomes in Quality, Education and Team Support office costs CY22 vs. CY21 80% of support office FTEs directly support centres or undertake centralised activities $M Gross BAC* Net Education People & Culture Compliance • Practice • HR Partne
Slide 34: Profit and Loss
PROFIT AND LOSS Group Financials • Revenue growth driven by fee reviews with occupancy flat on $M CY22 CY21 Change prior year • Operating EBITDA2 3% higher driven by cost management Total Operating Revenue2 903.5 866.3 4.3% mitigating inflationary impacts Employment costs (561.5) (537.6) 4.4% Proper
Slide 35: Balance Sheet
$M 31 December 2022 31 December 2021 BALANCE SHEET ASSETS Current assets Cash and cash equivalents 37.8 74.1 Trade and other receivables 22.5 19.6 Other current assets 12.7 12.3 Current tax asset 11.4 17.6 • Decrease in current assets due to cash utilised in capital Total current assets 84.4 123.6 e
Slide 36: Cash Flow
CASH FLOW • Operating cashflows of $136.8m, an increase of 62% on CY21 $M CY22 CY21 Change • Higher cashflows from trading due to the prior year Cash flows from operating activities including greater remediation payments (+ c.$34m) Receipts from customers (inclusive of GST) 897.7 868.5 3.4% Payments