This article is from the Australian Property Journal archive
G8 Education has delivered a lower full year net profit of $79.5 million due to ongoing headwinds in the childcare sector, which saw the group close eight centres in a bid to optimise its portfolio.
The result is 14.5% lower than the previous year’s $92.9 million. Although revenue in 2018 increased by 7.7% to $858.2 million. Underlying EPS fell 19.5% to 17.5 cents.
Managing director Gary Carroll said the group’s profit and cashflow results reflects the disciplined management in challenging market conditions.
“Although average like‐for‐like CY18 occupancy was down 1.9% to 74.0%, occupancy growth built steadily through the year with like‐for‐like occupancy finishing the year above the prior corresponding period.
“While it is clearly still early days, it is encouraging to see this positive trend in occupancy continuing into CY19. It was also pleasing to observe the improved performance of Queensland and Western Australia, both of which had lower supply growth rates, as well as the improved performance of New South Wales and Victoria in the second half.
“Tighter cost controls implemented from CY18 Q2 resulted in a stronger H2 wage performance, in line with expectations, with a solid outperformance in Q4 wage efficiency relative to the prior year,” he added.
Acquisitions contributed net earnings of $17.5 million, up 14% year on year, however the performance of prior year acquisitions was mixed and the results were below expectations in second half of the 2018.
Carroll said G8 is only half‐way through its transformation and is making strong progress and the results are encouraging.
“The group remains focused on driving initiatives aimed at improving quality that will positively impact occupancy and long‐term growth, whilst also delivering superior outcomes for our families.
“The group closed eight centres in CY18 and continues to evaluate opportunities to optimise its portfolio. There remains scope to grow our portfolio in a disciplined manner that will not cannibalise our existing centres,” Carroll said.
G8’s primary network growth focus remains its committed greenfield pipeline: 16 greenfield centres were completed in CY18 in line with expectations, with 19 centres targeted in CY19 (2 brownfield and 17 greenfield).
So far in the new calendar year, Carroll said G8 has had an encouraging start with occupancy growth of circa 2% YTD above PCP.
“Incremental earnings from prior year acquisitions are expected to be approximately $10 million in CY19. The investment costs associated with the ramp up of CY19 greenfield centres is likely to be $2 million in CY19.
“The CY19 result will be affected by the cessation of annual license fee revenue of $4 million following the mutually agreed termination of the broker exclusivity agreement. It is expected that this will be absorbed by the improved YoY wage performance.
“In summary, the new year has started encouragingly but it is still early days.” Carroll concluded.
Australian Property Journal
