G8 Education Limited · ASX:GEM
G8 Education — Investor Presentation (August 2022)
37 slides from G8 Education's investor presentation, Aug 24, 2022
Slide 1: ASX Announcement
ASX Announcement G8 Education Limited (ASX:GEM) 24 August 2022 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 2022 for G8 Education Limited, which includes a trading update and
Slide 2: 2022 Half Year Result Investor Presentation
2022 HALF YEAR RESULT INVESTOR PRESENTATION 24 AUGUST 2022 G8 EDUCATION LTD ASX: GEM 0
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: Acknowledgement of traditional owners
We would like to acknowledge the traditional owners of the land on which we meet and also acknowledge the elders past, present and emerging. We ask all people that walk, work and live on traditional Aboriginal lands, to be respectful of culture and traditions and work, learn and grow as a united com
Slide 5: Agenda
AGENDA CY22 H1 HIGHLIGHTS Gary Carroll OPERATING AND FINANCIAL PERFORMANCE Sharyn Williams MEDIUM TERM OUTLOOK AND STRATEGY Gary Carroll CURRENT TRADING & OUTLOOK Gary Carroll Q&A Gary Carroll & Sharyn Williams APPENDIX 3
Slide 6: CY22 H1 Highlights
CY22 H1 HIGHLIGHTS
Slide 7: Financial Summary
FINANCIAL SUMMARY CY21 H1 $M CY22 H1 Restated1 % Change • H1 occupancy of 67.1% (down 0.9%pts vs pcp) recovered strongly from the low in early March (down 2.1%pts vs Metrics the pcp) Occupancy (Core)2 67.1% 68.0% (0.9%pts) - This momentum has continued with 'spot' Operating Revenue3 416.7 421.5 (1.1
Slide 8: Strategy Building Positive Momentum
STRATEGY BUILDING POSITIVE MOMENTUM Capitalising on strong structural support Execution Financial strength Network optimisation Strong structural support Disciplined response to On-market share buyback Network optimisation Strong long-term challenging external underway funded by program continued, w
Slide 9: Drivers of Group Momentum
DRIVERS OF GROUP MOMENTUM Lead indicators supportive of improved occupancy outcomes Quality Team Family • 92% of G8 centres rated in CY22 H1 as ‘Meeting' or • Sector-wide workforce shortages is the Group’s key • Continued strong growth in new customer enquiry 'Exceeding’ versus national LDC average
Slide 10: Improvement Program
IMPROVEMENT PROGRAM Evolving from project approach to embedded BAU model Improvement Program (IP) ‘Business as Usual’ Model > 85% centres network (361 centres) completed, in line with target Learning Resources Identify Environments Tools and training centres Centre “Field” for focus Support Centre C
Slide 11: Environment, Social & Governance
ENVIRONMENT, SOCIAL & GOVERNANCE Targeting continuous improvement Our sustainability achievements (CY22 H1) What’s next for sustainability ✓ 92% 'Meeting' or 'Exceeding’ rating for centres Below are the key next steps which build upon the assessed under the National Quality important work already be
Slide 12: Operating and Financial Performance
OPERATING AND FINANCIAL PERFORMANCE
Slide 13: Operating and Financial Performance
OPERATING AND FINANCIAL PERFORMANCE • Earnings recovered strongly in Quarter 2 with occupancy narrowing the gap on 1H22 and 1H19 and Core centre earnings and margin above pcp • Quarter 1 heavily impacted by COVID-19 isolations and flood impacts resulting in a material reduction in occupancy and earn
Slide 14: Operating Performance
OPERATING PERFORMANCE Half on half $M CY22 H1 CY21 H1 CY22 H1 vs. CY21 H1 Core Centres • Revenue and margins significantly improved in quarter 2 (as No. of centres 434 444 -2.9% outlined in the following slide) No. of LP 35,769 36,884 -3.0% • Core centre revenue impacted vs pcp by lower bookings Cor
Slide 15: Operating Performance Quarter on Quarter
OPERATING PERFORMANCE Quarter on quarter CY22 Q1 vs. CY22 Q2 vs. $M CY22 Q1 CY21 Q1 CY22 Q2 CY21 Q2 CY21 Q1 CY21 Q2 • Q1 Core centre revenue reflects negative impacts from Omicron and floods but rebounded solidly in Q2 as the slightly lower bookings (relative to the pcp) were offset by Core Revenue
Slide 16: Core Occupancy Trend
CORE1 OCCUPANCY TREND • Occupancy in the first half of 67.1% narrowed the gap on Monthly Core1 Occupancy (%) CY22 H1 and CY19 H1, driven by the strategic change programs and re-establishment of the seasonal uplift trend • Following significant impact in Q1 due to Omicron cases and flooding, Q2 rebou
Slide 17: Core Occupancy: Regional Outperformance
CORE1 OCCUPANCY Regional outperformance maintained Geographic portfolio diversification, with limited CBD Occupancy by region exposure, provided some insulation against lockdowns Core Average Occupancy and isolation requirements CY22 v Licenced Region CY22 H1 CY21 H1 CY19 H1 CY22 v CY19 Centres2 • R
Slide 18: Wage Performance
WAGE PERFORMANCE Wages managed to attendance levels • Improved systems, training and processes have Wage hours per booking by fortnight resulted in positive wage performance • Wage hours per booking is lower than the prior year driven by an effective response to the challenging environment and despi
Slide 19: Greenfields
GREENFIELDS Changing portfolio shape in CY22 reflecting mature centre exits and openings • Refreshed Greenfield approach to further enhance the centre network Greenfield Occupancy (as at 30 June 2022) CY22 H1 performance - New centre openings subject to robust market assessment including supply/dema
Slide 20: Impaired Centres
IMPAIRED CENTRES Exit program progressing • 44% of the impaired centres have been either divested, leases surrendered, or conditional, Potential exit process continued for remaining impaired centres, however indicative agreements are in place 1 no impaired centres were exited in the period • Portfol
Slide 21: Cash Conversion
CASH CONVERSION Managed well with timing impacts EBITDA to Cash Flow Conversion • Cash conversion 117%, after adjustments for non- Rolling 12 Mth operating items $M CY22H1 12Mth CY21 Operating cash flow 77.9 84.3 • Reduction in gross operating cash flow driven + Net interest (non-leases) 10.6 11.1 p
Slide 22: Capex
CAPEX Property Investment supporting quality outcomes • Total CY22 H1 capex of $18.6m excludes $2.3m in software Total H1 CY22 Capex1 = $18.6 million development costs that previously would have been capitalised • CY22 Capex (including SaaS) expected to be $60m - $65m, subject to supply chain constr
Slide 23: Funding and Capital Management
FUNDING AND CAPITAL MANAGEMENT Strong balance sheet Dividend • CY21 fully franked dividend of 3.0 cents per share paid in April 2022 Gearing Ratios • CY22 fully franked interim dividend of 1.0 cents per share to be paid in October $M 30 June 2022 31 December 2021 Non-current borrowings 128.3 96.1 On
Slide 24: Medium Term Outlook and Strategy
MEDIUM TERM OUTLOOK AND STRATEGY
Slide 25: Strategic Direction: Pathway to Above 80% Occupancy
STRATEGIC DIRECTION Pathway to above 80% occupancy Leading contributing factors Sustainable outcomes More Increasing enquiries Increasing Pursuing Strong >80% & Optimising + + stable sector demand engaged + high quality + location operational execution = & higher family network occupancy team retent
Slide 26: Strong Fundamentals Driving Long Term Demand
STRONG FUNDAMENTALS DRIVING LONG TERM DEMAND Recognising the critical role of ECEC to families, society and the economy Employed people1 (June 2012 – June 2022) STRONG BI-PARTISAN SUPPORT • Early Childhood Education and Care (ECEC) sector is recognised, as evidenced through the pandemic, as critical
Slide 27: Workforce Macro Challenge
WORKFORCE MACRO CHALLENGE Multifaceted response to sector-wide issue Sector challenge Macro Response G8 Response Multi-year response underway • All states experiencing increased vacancy rates Tertiary - Bachelor qualifications • Above market remuneration in CM, ECT and trainee roles • ECT value prop
Slide 28: Current Trading and Outlook
CURRENT TRADING AND OUTLOOK
Slide 29: Current Trading & Outlook
CURRENT TRADING & OUTLOOK • Solid occupancy momentum built in the half supported by additional Child Care Subsidy (CCS) for siblings, low unemployment, growth in female workforce participation rates, improvement program outcomes and a strong enquiry pipeline • The occupancy seasonal trend has been r
Slide 30: Q&A
Q&A
Slide 31: Appendix
APPENDIX
Slide 32: Group Overview
GROUP OVERVIEW 448 CENTRES MOBILSATION & AUSTRALIA’S LARGEST Diversified geographic footprint across BROADER CARE Listed Early Childhood Education & Care (ECEC) provider Australia 37K+ Licensed places across Australia 41 67 8K+ Early Childhood Educators 26 166 45K+ 9 Children per week 0 139 $131 Ave
Slide 33: Supply Dynamics
SUPPLY DYNAMICS Macro Supply – Net New Centre Openings1 • LDC net supply annualised growth was 2.7% (vs 3.7% in H1 CY21) Micro 101 • G8 centres impacted by supply within 2km up to H1 CY22 decreased Number of Centres by 18% when compared to H1 CY21. 76 77 • Since January 2017, 322 G8 centres have bee
Slide 34: Financial Overview
FINANCIAL OVERVIEW • Revenues were impacted by parent gap fee waivers to $M CY22H1CY21H1 Restated1 % change support families (where children did not attend due to Total operating revenue 416.7 421.5 (1.1%) COVID-19) combined with the seasonal uplift trend not Employment costs (265.8) (262.3) 1.3% oc
Slide 35: Balance Sheet
$M 30 June 2022 31 December 2021 ASSETS Current assets BALANCE SHEET Cash and cash equivalents Trade and other receivables Other current assets 42.0 22.6 74.1 19.6 11.3 12.3 Current tax asset 27.1 17.6 Total current assets 103.0 123.6 • $100m junior debt facility repaid in June, $170m revolver Non-c
Slide 36: Cash Flow
CASH FLOW CY21H1 • Operating cashflows of $39m, a decrease of 14% on CY21 H1 $M CY22H1 Restated % change - Lower cashflows from trading due to lower operating Cash flows from operating activities Receipts from customers (inclusive of GST) 414.6 426.0 (2.7%) EBITDA (after lease interest and depreciat
Slide 37: Update on COVID-19 Government Support
UPDATE ON COVID-19 GOVERNMENT SUPPORT Gap fee waivers and increased allowable absences Gap Fee Waiver Allowable absences • The period during which services can elect to provide Gap Fee Waivers has been extended Families have 52 allowable absences in FY22 to 30 June 2023. Services can currently elect