This article is from the Australian Property Journal archive
WHILE workforce shortages across the early childhood education sector is continuing to impact G8 Education’s (ASX: GEM) operations, over the half year ended 30 June 2023 the group has still delivered an uptick in profits.
GEM posted a statutory net profit after tax of $15.0 million for the half year period, up 76.5% from $8.5 million in the previous year (CY22H1).
With earnings per security at 1.9 cents up 83.2% from 1.0 cents in the previous year.
GEM’s EBIT was at $46.6 million up 22.2% from $38.1 million in CY22H1, with revenue at $455.3 million up 9.3% from 416.4 million.
GEM declared an interim fully franked dividend of 1.5 cents per share, representing 81% of NPAT.
“G8 Education’s performance in the first months of CY23 demonstrates the improvements we are making across the business and the success we are having in our response to industry-wide issues, including rising costs and significant workforce shortages,” said Pejman Okhovat, CEO and managing director at G8 Education.
“After the challenging first half of CY22, which was disrupted by COVID-19 and flooding on the East Coast, we were pleased to deliver a modest increase in core occupancy in H1 CY23, which together with higher average fees and disciplined cost management in an inflationary environment, translated into stronger revenue, margins and earnings.”
GEM’s group occupancy was up 0.6% to 67.4% for the period, remaining constrained due to ongoing workforce shortages across the sector.
“The sector-wide workforce shortages remain the biggest issue facing our industry. While they continue to constrain occupancy rates, the impact is not uniform across our portfolio,” added Okhovat.
Currently, over 80% of the Group’s centres as a cohort have an average occupancy of circa 80%.
Retention levels were at 70.2% with a 24% reduction in vacancies, compared to an average increase in vacancies across the sector of 4%.
“Despite the inflationary pressure on families, overall demand for childcare is improving. We are already seeing some early positive signs following the Government’s changes to the CCS, with improved affordability translating into a small increase in average bookings per child,” said Okhovat.
GEM implemented a fee increase of 3.8% in July to mitigate cost inflation, including a record Child Services Award rate increase of 5.75% on 1 July 2023.
“Our cash generation and balance sheet remain strong following the completion of our buyback program in January, which underscored our commitment to delivering shareholder value and capital efficiency,” added Okhovat.
GEM’s balance sheet gearing was at 11% with net debt increased from $90.1 million to $103.4 million, with a conservative leverage of 0.9x Net Debt/Operating EBITDA.
Liquidity was at $165 million, with $42 million in cash and $123 million in undrawn facilities.
“While the long-term demand fundamentals of our sector remain attractive, our focus in the near-term remains on addressing the workforce shortages by attracting and retaining the team to support seasonal occupancy growth through the crucial CY23 enrolment and transition period,” concluded Okhovat.
