After increasing fees following an uptick in childcare subsidies for parents and reducing wages, early childhood care provider G8 Education (ASX: GEM) ended CY23 on a high.
The Company reported a 9.1% increase in revenue, reaching $983.4 million, alongside a 53.1% rise in Statutory NPAT to $56.1 million compared to CY22. This growth was primarily driven by improved operational performance, reflected in the Operating EBIT climbing to $100.6 million from $80.3 million in CY22, despite accounting for portfolio optimisation costs (since it divested some of its businesses) and other provisions. Occupancy remained flat at 70.4%.
G8 also noted improved employee retention and recruitment metrics, along with family satisfaction scores. Plus, shareholders saw a significant dividend increase, with a fully franked dividend of 3.0 cents per share declared for CY23, marking a 50% rise over CY22, totalling a full-year dividend of 4.5 cents.
G8 Managing Director & Chief Executive Officer Pejman Okhovat said, “While this result demonstrates G8’s strategic focus is building a stronger and more sustainable business, we know there is more to do. Improving occupancy remains a core focus with our largest states performing in line or above CY22 with further opportunities available in our smaller states.”
He added, “At our Strategy Day in late 2023, we announced a program of network optimisation to improve group performance. I’m pleased to report we have completed 8 of the targeted 31 divestments with another tranche of 8 with in-principal agreements.”
In the latter half of CY23, G8 Education experienced increased occupancy, primarily driven by higher frequency stemming from changes in Child Care Subsidy (CCS) and increased attendance from existing families. Larger states performed well, with opportunities identified to enhance occupancy trends in smaller states even more.
G8 did not see any centre reaching capacity limits due to limitations in its workforce. The Company’s focus on retaining and nurturing staff, combined with recruitment efforts, improved retention of Early Childhood Teachers (ECTs) and decreased reliance on agency staff compared to before. These advancements in retaining employees translated into improved experiences for families, reflected in increased rates of retention, enhanced enrollment conversions, and a rising Net Promoter Score (NPS).
Group spot occupancy for the week ending 25 February 2024 was 66.3%, 1.7% higher than CY23. A refined enrolment and transition program and process supported this improvement.
In January 2024, in what seems to be becoming an annual tradition, the Company hiked its fee by 4.5% citing inflationary pressures. Moreover, the nine centres already exited in CY24 to date are set to remove $700k in statutory EBIT losses.
G8’s strategy for capital allocation points to projected capital expenditures for 2024 ranging between $40 million and $45 million. The ongoing optimisation of its network is progressing, with more centres set to be divested this year.
Alinda is a Business Reporter for The Sentiment
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