G8 Education Limited Management Presentation Senior Unsecured Notes - PowerPoint PPT Presentation

For personal use only G8 Education Limited Management Presentation Senior Unsecured Notes Offering 22 July 2013 Investing in the future of childcare

For personal use only Company Discussion Page 3 Financial Discussion Page 9 Credit Highlights Page 15 Questions Page 17 Investing in the future of childcare

Click to edit Master title style For personal use only Company Discussion Page 3

Company History  G8 Education Limited (ASX:GEM) is Australia’s largest for profit provider of high quality, For personal use only developmental and educational child care services  G8 Education Limited currently has a portfolio of 201 childcare centres, either owned or contracted, in Australia and 18 childcare centres and 51 franchised centres in Singapore  G8 Education Limited has approximately 3% of the total Australian market providing scope for further expansion in what is a largely fragmented market  G8 Education Limited operates a multi-brand strategy which allows centres to operate largely autonomously from a care and education stand point, whilst overlaying the group with administrative, financial and reporting disciplines  G8 Education Limited has historically funded growth primarily through the equity markets and as a result maintains a very low level of gearing  The proposed notes offering adds tenure to the existing debt maturity profile and diversifies debt funding sources Investing in the future of childcare Page 4

Business Model G8 Education Limited’s business model is as operator and consolidator of childcare centres and maintains a multi-brand strategy. For personal use only Operations  G8 Education Limited is an experienced and focused operator of childcare centres and closely manages the key operational metrics and performance indicators at the individual centre level on a weekly basis. These include: Brian Bailison Andrew Kemp Chris Scott Jenny Hutson Susan  Centre operating profit Non-Executive Non-Executive Managing Chairperson Forrester Non-Executive Director Director Director  Director Occupancy  Revenue Chris Sacre  Labour Chief Operating & Financial Officer/Company Secretary  Rostering  Experienced layer of “operational” Glenn Davies Jae Fraser Angela Karzon Emily Jessica management that provide the necessary MacDonald IT Manager GM Marketing Battersby level of accountability to cost control and Operations Manager Financial HR Manager Controller procurement decisions Melanie Excell Kirsten Berry  Centre directors, operations managers Senior Operations Manager Senior Operations Manager and senior management are all 16 operations managers aligned to the same key operational metrics and performance indicators 201 centre directors More than 4,000 centre staff Over 13,400 Licenced places Investing in the future of childcare Page 5

Business Model (continued) Acquisition Strategy  Acquire centres which are in operation For personal use only  G8 Education Limited does not acquire greenfield sites, removing significant occupancy and construction risk  Acquisitions immediately deliver cashflow and earnings to the growth  Margin improvement is derived from integration of key operational metrics and performance indicators to lift individual centre performance  Disciplined approach in relation to price Acquistion and EBIT multiples  G8 Education Limited has acquired all centres on Number of Date Name EBIT ($m) Price ($m) EBIT Multiple 4.0 x EBIT centres Various - Announced only, not settled at date of  Senior management have a strong track report 11-Jun-13 17 6.0 24.0 4.0 record of successfully implemented this style of 3-Jun-13 Dolphin Childcare and Education 3 0.8 3.3 4.0 acquisition strategy 06-May-13 Rose Garden and Leaping 2 1.4 5.5 4.0 30-Apr-13 First Grammar, Learning Sactuary and Star Kids 12 3.6 14.5 4.0 15-Apr-13 Treehouse & Bellnore Drive 2 1.2 4.8 4.0 17-Dec-12 Learning Sanctuary 1 0.6 2.4 4.0 Centre portfolio 250 12-Nov-12 Pacific Group 16 7.0 28.0 4.0 Australia Singapore 22-Oct-12 Little Einstein 7 2.3 9.2 4.0 200 18 02-Oct-12 Kinder Haven 3 1.6 6.4 4.0 18 150 2-Oct-12 Koala 2 0.6 2.4 4.0 18 20-Aug-12 Casa bambini 3 2.5 10.0 4.0 100 189 167 24-Feb-12 Glen Gala Childrens Center 1 0.4 1.6 4.0 131 50 16-Dec-11 Educare 6 2.1 8.2 4.0 88 19-Apr-11 Kids Corner 6 1.8 7.1 4.0 0 01-Dec-10 Kindy Patch 30 5.0 19.9 4.0 FY10 FY11 FY12 YTD13 Source: Company releases; FIIG Securities Source: Company releases; FIIG Securities Investing in the future of childcare Page 6

Industry Overview  Fundamentals of the childcare industry remain strong with a demand/supply imbalance For personal use only  % of population attending child care Strong demand for childcare services underpinned by economic and 70 population changes resulting in an 60 increased attendance rate for long day 50 care 40  Demand factors driven by: 30 20  increased female participation in 10 the workforce 0  Australia’s long term economic 0 years 1 year 2 years 3 years 4 years 5 years stability NSW Vic Qld WA SA Tas ACT NT  low levels of underlying unemployment Total government expenditure ($m)  Government financial support 7,000  increased recognition of 6,000 educational and social benefits of early learning 5,000  4,000 childcare participation in Australia is low by western 3,000 country standards 2,000  The provision of childcare funding and 1,000 assistance is a central tenet of - FY06 FY07 FY08 FY09 FY10 FY11 FY12 Government policies well beyond Source: Report on Government Services 2013, Total government expenditure on early childhood education and childhood education care 2012 dollars; FIIG Securities Investing in the future of childcare Page 7

Industry Outlook  All major indicators point to a continued For personal use only positive outlook for the sector Proportion of children attending childcare  1,500 Government expenditures growing 39% year-on-year 1,450 37% 1,400 35%  Portion of children attending 33% 1,350 childcare trending up 31% 1,300  29% Growth in supply of long care 1,250 27% places outpaced by demand 1,200 25%  FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Industry will remain largely fragmented 0-5 yr olds ('000) Proportion attending (RHS) providing growth opportunities for Source: FIIG Securities; Report on Government Services; Petra Capital operators with the means to expand Change in Long Day Care places  Barriers to entry for major corporate 25,000 10% players around access to capital remain 9% 20,000 8%  Social trends supporting long day care 7% 15,000 6% 5% 10,000 4% 3% 5,000 2% 1% - 0% FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Additional LDC places Change pcp (RHS) Source: FIIG Securities; Report on Government Services; Petra Capital Investing in the future of childcare Page 8

Click to edit Master title style For personal use only Financial Discussion Page 9

Financial Performance - Historical Financial Year 2012 Results For personal use only Consolidated 2012 2011 % Year End December 31 ($000's) ($000's) Change Revenue 179,991 142,899 26% Expenses 148,054 116,114 28% EBITDA 31,937 26,785 19% less: D&A 2,530 1,903 EBIT 29,407 24,882 18% less: Interest Expense 2,539 2,188 Net Profit before Tax 26,868 22,694 18% Net Profit after Tax 19,209 17,250 11% less: Abnormal/Non-recurring Items 521 (3,343) Underlying Net Profit after Tax 19,730 13,907 42% Underlying EBIT 30,012 21,539 39% Key Credit Statistics Debt/EBITDA 1.5 1.4 Net Debt/EBITDA 0.9 0.8 Net Debt/Operating Cashflow 1.4 1.9 Interest Cover 12.6 12.2 Gearing ratio 24% 32%  Cashflows from operations of $20.0m represented 101% of NPAT ($19.7m) Investing in the future of childcare Page 10

Financial Performance – Historical (continued)  Underlying Revenues have increased 29% over the last financial year from $138m in 2011 to $179m in 2012 For personal use only  Like for like revenue (across 118 centres) increased 10% in 2012 $m Total Revenue 120  100 Underlying EBIT increased 39% over the last financial year from 80 $21.9m in 2011 to $30m in 2012 60  Like for like EBIT (across 118 centres) increased 11% in 40 2012 20 0 1H10 2H10 1H11 2H11 1H12 2H12  Group EBIT margin is affected by seasonal fluctuations in Source: Company releases; FIIG Securities occupancy from January to June due to the transition of children Group EBIT from Kindergarten to primary school $m 20  Peak occupancy is in November each year 18 16 14  12 Underlying EBIT margins have improved through a combination 10 of organic improvements and high quality acquisitions. 8  6 Underlying EBIT margin increased by 8% in 2012 4 2 -  Average portfolio occupancy increased year-on-year by 2% in 1H10 2H10 1H11 2H11 1H12 2H12 2011 and a further 3% year-on-year in 2012 Underlying EBIT Deferred consideration Source: Company releases; FIIG Securities  Like for like occupancy (across 118 centres) increased 2.2% in 1H11 vs 1H12 and 0.5% in 2H11 vs 2H12 Investing in the future of childcare Page 11