G8 Education Limited (ASX: GEM), established in 2006 and headquartered in Varsity Lakes, Australia, owns, operates, franchises, and manages around 519 child care centers across Australia and Singapore. Besides, the Group offers for-profit quality developmental and educational child care services.
Recently, the Group held its Annual General Meeting for 2019, and released the details of the same for the shareholders. As the Chairman addressed the meeting, he emphasised that the child care sector has the potential to profoundly impact Australia’s future as there is a clear evidence of the significance of brain development in the first three to five years of a child’s life. It covers social, cognitive as well as emotional development.
In July 2018, a new child care subsidy was announced, and the Group achieved major progress in developing strong foundations across its people, assets and capital base to ensure sustained growth and benefits for the long?term amidst a challenging year. G8 Education acquired around 16 early education centres and disposed of eight underperforming centres. As of December 31st, 2018, the Group had 502 centres in Australia and 17 in Singapore servicing ~ 52,000 children.
Apart from strong capital expenditure including 170 refurbishment and improvement activities across the centres, G8 Education also introduced new training programs with respect to the national quality standards during the year.
The Group’s financial performance during the year demonstrates the influence of the changing market conditions and the implementation of the Group’s strategy. According to the results for the full year ended December 31st, 2018, the EBIT reduced by 12.7 % to $ 136.3 million, in line with management guidance and primarily the first half when the weaker occupancy from supply pressures combined with higher wages from regulatory change,s to produce a H1 EBIT of $ 13 million lower than the prior year.
However, in the second half (H2 2018) a more complimentary subsidy framework and improvements flowing from strategy implementation resulted in EBIT that was broadly in line with the prior corresponding period and $ 7 million lower after investments , to drive G8 Education’s strategic plans. Leading into 2019, the cashflow generation continued to be strong as operating activities generated ~$ 105.9 million while around $ 48.1 million were paid out in dividends to shareholders.
Also, in 2018, further improvements were made to the Group’s capital base, with the successful execution of $ 500 million syndicated bank debt financing that was utilised to refinance the Group’s $ 200 million-bank debt facility and the remainder to refinance the Group’s $ 270-million Singapore bond facility in May 2019.
According to the Managing Director, Gary Carroll, the Group is working on a couple of initiatives for customers including the roll?out of the second phase of the child care management system platform, XPlor, that would offer enhanced communications capability to parents as well as automate a number of functions for their centre teams. This project is on schedule and expected to be completed by June 2019.
G8 Education’s current market valuation is around AUD 1.49 billion. On Aril 17th, 2019, the GEM stock price was trending at AUD 3.110, down 4.012% with a positive YTD return of 19.12% so far.
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