G8 Education Limited · ASX:GEM
G8 Education — Investor Presentation (August 2018)
29 slides from G8 Education's investor presentation, Aug 27, 2018
Slide 1: 2018 Half Year Results Investor Presentation
2018 HALF YEAR RESULTS INVESTOR PRESENTATION 27 AUGUST 2018
Slide 2: 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 3: Agenda
AGENDA OVERVIEW & CEO COMMENTARY Gary Carroll G8 EDUCATION LIMITED GROUP FINANCIALS ASX: GEM Sharyn Williams STRATEGY UPDATE Gary Carroll CURRENT TRADING & OUTLOOK Gary Carroll Q&A Gary Carroll and Sharyn Williams APPENDIX 3
Slide 4: Overview & CEO Commentary
OVERVIEW & CEO COMMENTARY GARY CARROLL
Slide 5: Gary Carroll - CEO
“The first 6 months of 2018 were a period of significant change and challenge in the early education sector in Australia, with the implementation of a new subsidy framework coming into effect on 2 July and continued pressure on sector occupancies from heightened levels of supply growth. Against this
Slide 6: CY18 H1 Snapshot
CY18 H1 SNAPSHOT Strong progress in strengthening the foundation • Centre upgrade and training program on track • Child Care Management System changeover project completed including electronic check $M CY18 H1 CY17 H1 % change in/out Total Revenue 396.4 368.3 7.6% Successful transition to new Jobs f
Slide 7: Sector Dynamics
SECTOR DYNAMICS Resilient with good long term fundamentals HIGHLY FRAGMENTED CHALLENGED BY DEMAND SHIFT FAVOURS BENEFITS AND IMPROVED WITH STRUCTURAL OVERSUPPLY QUALITY AND SCALE AFFORDABILITY TO BOLSTER GROWTH DRIVERS OCCUPANCY • Top 5 players have only circa 20% • Oversupply is being driven by • I
Slide 8: Supply/Demand Dynamics
SUPPLY/DEMAND DYNAMICS Signs of moderating supply evident National Long Day Care Supply (% change YoY) Long Day Care Centres Opened / Firm & Commenced DAs 157 155 4.5% 134 4.0% 3.5% 101 3.0% 87 2.5% 2.0% 50 1.5% 1.0% 0.5% 0.0% CY16 CY16 CY17 CY17 CY17 CY17 CY18 CY18 2017 H1 2017 H2 2018 H1 2018 H2 E
Slide 9: Occupancy
Average Half-Yearly Occupancy* (%) 90% 79.0% OCCUPANCY 80% 70% 72.6% 70.1% 60% 50% • Average like-for-like CY18 H1 occupancy* of 40% 70.1%, down 2.5%pt vs. CY17 H1 of 72.6% 30% • Oversupply continuing to impact occupancy, as 20% 10% evidenced by the State by State performance 0% CY17 H1 CY17 H2 CY18
Slide 10: Occupancy – Recent Trends
OCCUPANCY – RECENT TRENDS Steady improvement since February Average Monthly Occupancy (%) Occupancy improvement from January base (%) 100% 8% 2016 2017 2018 2016 2017 2018 7% 90% 6% 5% 4% 80% 3% 2% 70% 1% 0% 60% -1% -2% -3% 50% Jan Feb Mar Apr May Jun Jul Aug Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Slide 11: Wage Performance
WAGE PERFORMANCE Improving outlook for H2 Fortnightly hours per booking (2018 YTD vs 2017) • The implementation of roster changes to accommodate regulatory change impacted wage costs by $7.2 million in CY18 H1, predominantly in CY18 Q1 2017 2018 • Improved performance in CY18 Q2 resulted in Wage Hou
Slide 12: Operating Performance
OPERATING PERFORMANCE $M CY18 H1 CY17 H1* % change Total Organic Revenue 331.0 329.4 0.5% • Organic Centre revenue was broadly flat on pcp as prior year fee increases were offset by the decline in occupancy, with discounts in Wages 192.7 182.1 5.8% line with prior period Rent 41.2 40.0 2.9% Deprecia
Slide 13: Network Growth Strategy
NETWORK GROWTH STRATEGY Underpinned by detailed network modelling Centre Portfolio • Network growth strategy is based on detailed network modelling encompassing forecast supply/demand, competitive environment and demographic profiling 600 • There is financial capacity and potential to significantly
Slide 14: Group Financials
GROUP FINANCIALS SHARYN WILLIAMS
Slide 15: Cashflow
CASHFLOW $M Cash flows from Operating Activities CY18 H1 CY17 H1 Receipts from customers (net of GST) 391.6 366.2 • Group cashflow generation continued to be Payments to suppliers and employees (net of GST) (336.6) (309.9) Interest received 0.2 0.2 strong, with cash conversion of 99% in CY18 H1 Inte
Slide 16: Capex Commitments
CAPEX COMMITMENTS Supported by robust cashflow conversion EBITDA to Cashflow conversion $M CY18 H1 CY17 H1 • CY18 total Capex expected to be $30 million • C18 H2 acquisition activity is expected to Operating cash flow 30.3 24.7 include settling 12 centres with a total cash + Net interest 10.9 13.0 o
Slide 17: Debt Ratios and Capital Returns
DEBT RATIOS AND CAPITAL RETURNS Debt Ratios Return on Capital Employed $M CY18 H1 CY17 $M CY18 H1 CY17 H1 Current borrowings 268.9 49.9 Underlying EBIT (last 12 months) 142.9 164.3 Non-current borrowings 79.0 267.4 Cash and cash equivalents (31.5) (49.2) Shareholders' equity (average last 12 months)
Slide 18: Capital Management
CAPITAL MANAGEMENT Reinforcing balance sheet strength Refinancing update Move to Proportionate Dividend Policy • Secured credit approved underwritten commitments for a • In 2017 the Board announced a proportionate dividend $400 million syndicated bank debt facility on more policy from 2019, being a
Slide 19: Strategy Update
STRATEGY UPDATE GARY CARROLL
Slide 20: G8 Is a Market Leader
G8 IS A MARKET LEADER With significant competitive advantages AUSTRALIA’S LARGEST Listed Early Childhood Education & Care (ECEC) provider 41K+ 80 Licensed places across 70 29 Australia and Singapore 9K+ Early Childhood Educators 188 52K Children per week ~512 Centres Diversified geographic footprint
Slide 21: Strategic Priorities
STRATEGIC PRIORITIES To reinforce leading market position STRATEGIC BUILD A STRENGTHEN THE CREATE SUSTAINABLE CONTINUE PRIORITIES GREAT TEAM FOUNDATION DIFFERENTIATION PROFITABLE GROWTH • Source, develop, engage • Elevate centre asset quality • Use scale to provide • Disciplined network and retain g
Slide 22: Strengthening Competitive Position
STRENGTHENING COMPETITIVE POSITION STRATEGIC BUILD A STRENGTHEN THE CREATE SUSTAINABLE CONTINUE PRIORITIES GREAT TEAM FOUNDATION DIFFERENTIATION PROFITABLE GROWTH • Rolled out team member • Rolled out stage 1 of CCMS • Completed Call Centre Pilot • Managed greenfield benefits program • Asset upgrade
Slide 23: Current Trading & Outlook
CURRENT TRADING & OUTLOOK GARY CARROLL GARY CARROLL
Slide 24: Current Trading & Outlook
CURRENT TRADING & OUTLOOK • While occupancy growth in July and August is encouraging, and demand is forecast to improve as a result of the new Child Care Subsidy, the combination of supply conditions and regulatory change is unprecedented. Notwithstanding continued improvement in quality and capabil
Slide 25: Gary Carroll - CEO
“In summary, against a challenging sector backdrop, G8 made strong progress in delivering against its strategic growth agenda while delivering profit and cashflow results that demonstrate the resilience of the Group. We remain confident that our strategy, when combined with a strong financial capaci
Slide 26: Q&A
Q&A
Slide 27: Appendix
APPENDIX 27
Slide 28: Key Profit & Loss Drivers
KEY PROFIT & LOSS DRIVERS Earnings Bridge from CY17 H1 to CY18 H1 • Revenue from organic centres neutral as occupancy reduction offset by fee increases. 13.5 • CY18 H1 EBIT reduction is less than 10%, (11.9) 61.1 (3.7) (4.6) 0.9 55.3 excluding incremental wage costs from (7.2) 48.1 regulatory change
Slide 29: Thank You
G8 Educati6t