In what has to be considered a remarkable result, childcare operator Mayfield Childcare (ASX: MFD) has delivered $3.5 million in net profits despite facing an existential shortage in labour and occupancy rates dropping all over the country as the pandemic toll continues to plague the industry.
For the six months ended 30 June 2022, Mayfield reported $32.4 million in revenue which was an 85% increase on the previous corresponding half year. This delivered $3.5 million in net profit after tax but was boosted by 14 Genius Learning centres acquired in 2021.
On a like-for-like basis without those acquired centres, revenue was up 11.2% to $18.8m and net profit up 17.7% to $1.9m.
What makes the gains more impressive is that they have been delivered despite occupancy rate across their network of centres decreasing. Core occupancy of 67.6% was a 0.4% decline and lower than that of rival G8 Education (70.9% in CY21).
Occupancy has been affected both from the supply and demand side. Supply has decreased due to labour issues linked with higher absenteeism when staff claim to have COVID while international border restrictions put a halt on the pipeline of migrants that churn into the sector. On the demand side, more families struggle with the cost of childcare and have elected to keep them at home.
Addressing the staffing issues, where full time roles pay as little as $20.38 per hour, Mayfair profits have been stalled by their increasing reliance on agency workers (who are paid a higher casual rate). In instances where they have not been able to source agency staff, Mayfair made the decision to close centres for 1-2 days at a time.
“As indicated previously, the business expects educator shortages and the high use of agency staff to remain throughout the second half and remain an issue in the near term,” the Company said.
“The business has implemented solid price increases reflecting the higher cost environment, which will provide some offset.”
Charging an average of $127 per day for childcare, Mayfield has increased its fees by 5.2% to be marginally higher than the 4.6% increase in the Children’s Services Award.
Going forward, Mayfield has flagged 2022 as a year of steep change for the Company where they have positioned themselves as the operator of premium centres with a $25m finance facility available to grow the network further.
Mayfield has declared a fully franked interim dividend of $0.0276 per share.
MFD shares responded poorly to the half year results to be trading at $1.27 in early morning trade, 5.9% fall from their previous $1.35 close.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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