G8 Education plunged 13% on ASX amid FY18 full year results.

GEM

On 25th February 2019, G8 Education Limited (ASX: GEM) which is into the business of providing high quality and educational child care centres through its own 470 education centres across Australia, declared its FY18 full year results. Total revenue for the CY18 stood at $858.2 million which has increased by 7.7% from the revenue of $796.8 million in CY17.

The EBITDA for the CY18 stood at $149.1 million which is down by 10.1% from $165.9 million in CY17.

The underlying net profit after tax (NPAT) stood at $79.4 million which dropped by 14.5% from the CY17 NPAT of $92.2 million. [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

Due to decrease in these figures, the basic and underlying earnings per share (EPS) also dropped from the previous year. The basic EPS dropped to 15.9 cents per share in CY18, down by 16.1% from the CY17 EPS of 18.9 cents pe share and underlying EPS dropped to 17.5 cents per share in CY18, drop of 19.5% from previous reported number of 21.8 cents per share in CY17.

However, the company did not fall back on its dividend policy. The company has declared a dividend of $0.08 per ordinary share for the 2HCY18 which will be payable on 5th April 2019 and accounts for 75% of the total NPAT. The ex-date and the record date for the dividend is 14th March 2019 and 15th March 2019 respectively.

On the balance sheet front, the picture has improved. The total current assets have increased from $92.2 million in CY17 to $117 million in CY18, a healthy jump of more than 26%. Whereas the total assets also increased from $1293.2 million in CY17 to $1386.5 million in CY18. The company has acquired 16 centres during the year which has increased the goodwill and consequently contributed in increasing the value of intangible assets from $1088 million in CY17 to $1134.5 million in CY18. The company was also able to reduce its long-term borrowings to $92.2 million in CY18 from $253.6 million in CY17 which is massive a decrease of more than 63% in a year.

The company also updated about its future outlook and current operations. It expects the borrowing cost to increase slightly in CY19 than what they realised in CY18 due to the reduction in the interest rate but expects it to be off set by the increased drawings to fund the Greenfield pipeline project which is committed to be completed in 2HCY19. The company also expects an increase in the earnings by approximately $10 million in CY19, coming in from the acquisitions done in CY18 with the investment cost for these centres in CY19 going up by $2 million.

The overall results seem to be below the expectation of the investors as the stock fell by more than 13% to A$ 3.145 as of 25th February 2019 (AEST: 3:15 PM) from the previous closing of A3.63. This fall will negate the total return of 14.5% which has been achieved in the past one year.


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