Early education centres operator G8 Education [ASX:GEM] today provided a trading update for its business operations and financials within the period ending 30 November.
The group reported operating earnings before interest and tax of $71 million year-to-date and operating net profit of $41 million over the period — results which had ‘significantly improved’ from the second quarter.
GEM shares were rising slightly in the afternoon, worth $1.01 at the time of writing. The children’s service stock is up by 11% in its sector average. However, its share value has slipped on its own records by 8.5% year-to-date.
It is currently trending under the wider market by more than 5%.
Source: tradingview.com
An improved trading update for G8 Education
On Tuesday, the childcare education service provider opted to release its latest trading update for year-to-date operations and unaudited financials ending 30 November 2022.
GEM reported year-to-date EBIT (earnings before interest and tax) of $71 million and operating NPAT (net profit after tax) of $41 million, after lease interest of $33 million over the 11 months and before certain non-operational costs.
The business’ spot core occupancy, calculated for the week ended 4 December 2022, was at 77.3%, 1% percentage point above calendar year 2021 and 1.3% percentage points below calendar year 2019.
Sector workforce shortages were flagged as a major impact on occupancy and conversion rates, with a segment of its network hampered by team member availability throughout the year.
GEM said its wages were effectively managed to mitigate any elevated agency usage, and its ‘cost out program’ was also on target to reduce impacts caused by inflation.
G8 said that implementing the HRIS system and further training and process enhancements have resulted in a positive wage performance, with better efficiency reflected in wage hours per booking.
The company noted that its revenue and earnings had ‘significantly improved’ from the second quarter onwards, which the business took as a reflection of well-managed recovery and cost control.
GEM managed to keep its net debt flat in the first half, with the group’s total debt sitting at $87 million.
Operating cash flows, in addition to lease payments from July to November, generated around $53 million, with funding CapEx nearing $26 million and dividends at $8 million with around $18 million in the company’s recent buyback.
Around 31 million shares, totalling $32 million, were repurchased in the share buyback (to 9 December 2022), and G8 has determined it will spend up to $40 million in total. The buyback is expected to conclude during Q1 CY23.
The company had conservative leverage by the end of November, 0.9 times its net debt/EBITDA. This is based on a rolling 12-month EBITDA after lease interest ($37 million for 12 months) and lease depreciation ($69 million for 12 months) and before non-operating items such as gains on sales, SaaS development costs and restructuring costs.
With the federal government’s ‘Cheaper Child Care Bill’ now passed, the company looks forward to improved macro conditions as improved affordability and accessibility targets are improved across the sector, and families are offered financial ease via more supportive childcare subsidies.
Source: GEM
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