G8 Education Limited · ASX:GEM
G8 Education — Investor Day (November 2019)
32 slides from G8 Education's investor day presentation, Nov 14, 2019
Slide 1: 2019 Investor Day
2019 INVESTOR DAY 14 November 2019 1
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 TRADING UPDATE Gary Carroll G8 EDUCATION LIMITED ASX: GEM SUPPLY UPDATE Gary Carroll STRATEGIC UPDATE Gary Carroll ACCELERATING PERFORMANCE Sharyn Williams & Jason Ball SUMMARY Gary Carroll Q&A Gary Carroll, Sharyn Williams and Jason Ball 3
Slide 4: Trading Update
GR Education’ TRADING UPDATE Gary Carroll
Slide 5: Pathway to Sustainable Returns
PATHWAY TO SUSTAINABLE RETURNS Strong foundations built – focus shifts to accelerating performance Mature operating state Medium term occupancy and return targets achieved Greenfield centres Turnarounds centres Portfolio optimisation Recapitalisation and enhanced New products bank relationships Bran
Slide 6: Shifting Gears to Accelerate Performance
SHIFTING GEARS TO ACCELERATE PERFORMANCE Near term occupancy headwinds remain, foundations in place to drive growth Foundational performance Earnings headwinds • Foundational strategy is on track and delivering results • CY19 occupancy growth is now expected to be circa 1% on Centre Manager and Ea
Slide 7: Shifting Gears to Accelerate Performance (cont.)
SHIFTING GEARS TO ACCELERATE PERFORMANCE (cont.) Near term occupancy headwinds remain, foundations in place to drive growth Acceleration • Encouraging results from turnaround centre pilot • Acceleration of EBIT growth in CY20 Occupancy growth is well ahead of the – centre turnaround program using
Slide 8: Occupancy – Recent Trends
OCCUPANCY – RECENT TRENDS Average Monthly Occupancy* (%) Occupancy* improvement from February base (%) 14% 2017 2018 2019 2017 2018 2019 12% 85% 10% 8% 75% 6% 4% 2% 65% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec • CY19 like-for-like (YTD) occu
Slide 9: Wage Performance
WAGE PERFORMANCE Trending in the right direction Fortnightly Wages hours per booking (CY19 vs CY18) • Occupancy headwinds flowed through to wage performance and this, coupled with delayed realisation of efficiencies, resulted in Q3 wage costs being higher than forecast • Wage performance improving i
Slide 10: Current Trading & Outlook
CURRENT TRADING & OUTLOOK • Guidance provided in August 2019 was predicated upon occupancy growth of mid 1% pts and wage efficiencies • Occupancy growth of circa 1% pts translates to a $7m revenue shortfall to this target and has a significant flow-on effect to EBIT due to our seasonal earnings prof
Slide 11: Supply Update
SUPPLY UPDATE Gary Carroll
Slide 12: Supply Dynamics - Macro
SUPPLY DYNAMICS - MACRO At a macro level, supply growth is moderating National Long Day Care (LDC) Net Supply Growth % change yoy • CY19 YTD net supply growth decreased to 3.7% vs 4.3% in the PCP, in line with previous forecast % Net change in supply YoY 12
Slide 13: Supply Dynamics - Micro
SUPPLY DYNAMICS - MICRO Stable engaged team & centre quality key to growing occupancy despite new supply Cumulative Effect of Supply – centres impacted since 2017* • Since January 2017, circa 270 centres or almost 55% of the portfolio have faced new supply 61% centres increased • Of the centres impa
Slide 14: Supply Impact Examples
SUPPLY IMPACT EXAMPLES Opportunities exist despite supply headwinds Vattana Early St Marina Early Kindy Patch Manly Learning Centre Learning Centre No New Supply 2017/2018/2019 No New Supply 2017/2018/2019 New Supply 2017 and 2018 High Occupancy High Occupancy High Occupancy Low Turnover Low Turnove
Slide 15: Strategy Update
STRATEGY UPDATE Gary Carroll
Slide 16: Build A Great Team / Strengthen the Foundation
BUILD A GREAT TEAM Balance Sheet Recapitalised and enhanced bank relationships Quality Refresh and refurbish – 70 centres Training program Work routines – Area Managers Induction and Onboarding Product Education team and education strategy Customer research STRENGTHEN THE Best practi
Slide 17: Build A Great Team
BUILD A GREAT TEAM Leadership Increased capability of leadership team Foundational HR ECT base pay Induction and onboarding HR business partners Performance and potential framework BUILD A GREAT TEAM Retention Team member benefits Leadership training 17
Slide 18: Accelerating EBIT Growth
ACCELERATING EBIT GROWTH Capitalising on our foundation and learnings to drive portfolio performance Turnaround Greenfield 80 centres using tested methodology 44 centres ramping up indicative EBIT uplift of $15m* $30m+ incremental EBIT uplift potential from 2019 based on acquisition multiples SIGNIF
Slide 19: Accelerating Performance
ACCELERATING PERFORMANCE Sharyn Williams & Jason Ball
Slide 20: Portfolio Optimisation: Segments
PORTFOLIO OPTIMISATION Segmentation to drive focus and returns • A strategic portfolio optimisation process has been developed to assess and optimise portfolio Turnaround Greenfield potential underperforming relative to potential 44 centres acquired 2017 to 2019 Current performance and future pote
Slide 21: Portfolio Optimisation
Optimisation PORTFOLIO OPTIMISATION Active portfolio management to optimise returns • While the current focus is on accelerating EBIT growth of existing centres, there is significant potential to recycle Centre Portfolio capital from divestments into acquisitions to grow the portfolio and generate h
Slide 22: Greenfield Centre Portfolio Snapshot
Greenfield GREENFIELD CENTRE PORTFOLIO SNAPSHOT Mature centres performing well, bulk of portfolio in early ramp up 2017 COHORT 2018 COHORT 2019 COHORT CENTRES 12 10 22 (12 opened CY19) CAPITAL $33m $29m $93m • 8 above 80% occupancy, • 4 above 80% occupancy, including • 5 reached or are on track to r
Slide 23: Greenfield EBIT Optimisation
Greenfield GREENFIELD EBIT OPTIMISATION EBIT matures with changes in room mix and scale cost efficiencies Greenfield – 2018 Cohort Greenfield – 2017 Cohort Organic centres Wage Wage Wage cost cost cost % % % LDC Bookings by Age LDC Bookings by Age LDC Bookings by Age • In addition to wage improvemen
Slide 24: Turnaround Centres
Turnaround TURNAROUND CENTRES Becoming the first choice in every neighbourhood • The turnaround centres previously operated at a high level and continue to have positive market characteristics Physical appeal and location Stable engaged team • The pilot program tested actions to improve each of the
Slide 25: Turnaround Centres
Turnaround TURNAROUND CENTRES Building the centre of first choice in the neighbourhood Process For Turnaround Program Audit of centres across the Development and Upgrade learning Upgrade physical four areas to drive plan delivery of people plan environments appeal 2 WEEKS 3 TO 6 MONTHS 3 MONTHS UP T
Slide 26: Turnaround Centres: Early wins
Turnaround TURNAROUND CENTRES Early wins Turnaround Pilot – Weekly Occupancy Turnaround Pilot – Occupancy Growth From Feb Base • Results of the 13 pilot centres that commenced in May/June have been encouraging with occupancy growing well ahead of the network • The pilot has been conducted using a pa
Slide 27: Summary
Leadership New leadership team SUMMARY Gary Carroll
Slide 28: Summary
SUMMARY Strong foundations built – focus shifts to accelerating performance Mature operating state Proactive portfolio management Medium term occupancy and underway return targets achieved Proven methodology for turnarounds Full-time team to deliver Foundational people, product and $45m+ EBIT growth
Slide 29: Q&A
Q&A
Slide 30: Reference Materials
= REFERENCE MATERIALS
Slide 31: Quality Drives Occupancy
QUALITY DRIVES OCCUPANCY National Quality Scheme – G8 Ratings G8 NQS Ratings: G8 NQS Ratings: G8 NQS Ratings: Where we were Where we are Where we need to be +2% EXCEEDING NQS*: 22% 21% 40% MEETING NQS: 57% 61% 50% POINTS TO GROUP WORKING OCCUPANCY TOWARDS NQS: 21% 18% 10% * In February 2018 changes
Slide 32: The Journey
+ Refresh & Refurb + Education team & strategy + Best practice framework & hub + Customer research THE JOURNEY INTEGRATION RECAPITALISATION OF + Greenfields maturing, + CRM BALANCE SHEET + Brownfields Xplor Core/CCMS + Leadership development + Xplor P2 (parent & educator apps) + Centralised enquiry