For personal use only G8 Education ‐ Overview G8 Education Limited (ASX:GEM) 25 February 2013
Corporate Snapshot For personal use only Capital Structure Directors & Senior Management Ordinary Shares 270.9 million Jenny Hutson Chairperson Options exercisable at $1.27 0.2 million Chris Scott Managing Director Shares price 22 February 2013 $1. 785 Andrew Kemp Non ‐ Executive Director Market capitalisation 484 million Brian Bailison Non ‐ Executive Director Matthew Reynolds Non ‐ Executive Director Cash (as at 31/12/12) $21.8 million Susan Forrester Non ‐ Executive Director Drawn debt (as at 31/12/12) $50 million Chris Sacre Chief Financial Officer Senior debt facility $50 million Jae Fraser General Manager Operations 1 Year Share Price Chart 180 Substantial shareholders 160 140 Substantial Shareholder Shares % Holding 120 Perpetual Limited 29,889,139 11.03% 100 Wallace Infrastructure 24,000,000 8.88% 80 60 Northcape Capital 17,149,433 6.33% 40 20 0 Jan ‐ 12 Mar ‐ 12 May ‐ 12 Jul ‐ 12 Aug ‐ 12 Oct ‐ 12 Dec ‐ 12 FY12 Results Presentation Page 2
G8’s Vision & Mission For personal use only Our mission is to be Australasia’s leading provider of high quality, developmental and educational child care services. We aim to achieve this through: • A portfolio of outstanding early childhood education brands • A focus on the importance of early childhood education • By making good centres great through focusing on outstanding early childhood education management Employees Community Profitability Quality Education & Care T o be responsive to T o commit to T o grow and derive local families and employee value for T o nurture and deliver upon development and a shareholders through develop children’s community rewarding culture innovative services, minds, social skills expectations which will ensure an systems and and confidence in a engaged and driven management safe and stimulating workforce environment FY12 Results Presentation Page 3
FY12 Audited Results Consolidated For personal use only 2012 2011 Year end 31 December ($’000) ($’000) Variance (%) Revenue 26% 179,991 142,899 Expenses 28% (150,584) (118,017) Earnings Before Interest and Tax 18% 29,407 24,882 Interest 16% (2,539) (2,188) Net Profit Before Tax 18% 26,868 22,694 Net Profit After Tax 11% 19,209 17,250 Less non ‐ recurring abnormal transactions: Deferred consideration not paid (954) (4,299) Legal expenses in relation to the Singapore court case 535 956 Share based payment expense 250 ‐ Stamp duty 494 ‐ Write off of borrowing costs on refinance 196 ‐ Underlying Net Profit After Tax 42% 19,730 13,907 Underlying EPS (cents per share) 23% 9.20 7.48 Underlying Earnings Before Interest and Tax 39% 30,012 21,539 Gearing ratio 24% 32% Source: Annual Report lodged 25 February 2013 Operating cashflow remains strong at $20.0m for CY12 which represents 101% of underlying NPAT at $19.7m. FY12 Results Presentation Page 4
Financial performance For personal use only Group Financial Performance ‐ First Half Year Analysis $90.0 $12.0 $78.0 $80.0 • From 2010 to 2012 G8 $10.0 $70.0 $60.7 $10.1 Education Limited achieved $60.0 $8.0 an underlying CAGR for $50.0 $7.3 $6.0 $40.0 EBIT and Revenue of 54% $30.0 $23.3 $4.0 and 39% respectively. $20.0 $2.0 • Underlying revenue $10.0 $1.6 $0.0 $0.0 increased by 29% from 1H10 1H11 1H12 $138m in FY11 to $179m in Underlying Revenue ($m) Underlying EBIT ($m) FY12. • Underlying EBIT increased Group Financial Performance ‐ Second Half Year Analysis $120.0 $25.0 39% from $21.9m in FY11 $101.0 $100.0 to $30.0m FY12. $20.0 $77.3 $19.9 $80.0 • Like for like revenue and $15.0 $60.0 $14.2 EBIT increased 10% and 11 $43.1 $10.0 $40.0 % respectively from FY11 to $6.6 $5.0 $20.0 FY12 across 118 centres. $0.0 $0.0 2H10 2H11 2H12 Underlying Revenue ($m) Underlying EBIT ($m) FY12 Results Presentation Page 5
Financial performance For personal use only FY12 FY11 • Return on Invested Capital Equity as at 31 December 2012 182,307,582 115,164,091 continues to increase. It is currently 24.8% based on the Fair value adjustments to equity due to AASB 3:Business adjusted equity value as at 31 Combinations 24,026,790 23,835,853 December 2012. Adjust equity for fair value 158,280,792 91,328,238 • The fair value adjustments Add Net Debt 27,462,272 22,232,372 shown opposite represent 185,743,064 113,560,610 accounting adjustments to equity based on the difference in Average forecast EBIT for FY13 as published by five the value of the shares taken by broking houses 46,000,000 27,000,000 vendors at settlement as payment of the purchase price Return on Invested Capital 24.8% 23.8% compared to the original share value agreed at the time of contract. This is a result of the share price change between contract date and the settlement date. FY12 Results Presentation Page 6
Financial Margin analysis For personal use only Group Margin Analysis ‐ First Half 14% 13% 12% 12% 10% 8% • Group EBIT margin is affected by 7% 8% 7% seasonal fluctuations in occupancy from 6% January to June compared with July to 4% 3% December due to the transition of 2% children from Kindergarten to primary 0% 1H10 1H11 1H12 school in January each year. Underlying NPAT margin Underlying EBIT margin Group Margin Analysis ‐ Second Half • Underlying EBIT margins have improved through a combination of organic 25% 20% improvements and high quality 18% 20% acquisitions. 15% 13% 15% 12% 9% 10% • Underlying EBIT and NPAT margin have increased by 8% and 10% respectively in 5% FY12 compared to FY11 0% 2H10A 2H11A 2H12A Underlying NPAT margin Underlying EBIT margin FY12 Results Presentation Page 7
Centre Portfolio For personal use only Centre Portfolio Australian centres Singpore centres 18 • G8 Education has continued to make earnings 18 18 18 per share accretive acquisitions throughout 2012. 167 135 136 132 88 77 • The group acquired 33 childcare centres during 2012 and sold one centre. 1H10A 2H10A 1H11A 2H11A 1H12A 2H12A • There are 7 other centres that the group will consider divesting in 2013. Change In Portfolio Additions Disposals • G8 Education Limited represents approximately 3% of the long day care childcare sector in Australia . The acquisition opportunities remain strong. ‐ ‐ 63 39 31 12 9 2 ‐ 1 ‐ 1 ‐ 1 ‐ 6 1H10A 2H10A 1H11A 2H11A 1H12A 2H12A FY12 Results Presentation Page 8
Occupancy For personal use only Occupancy • Average portfolio occupancy increased year on year by 2 full percentage points in FY11 (for example: 78% to 80%) and a further 3% year on year in FY12. FY12 Percentage • The portfolio peak occupancy is in November each FY11 year. It increased year on year by 4% in FY11 and a further 2% year on year in FY12. FY10 • Like for like occupancy across 118 child care centres has increased by 2.2% in 1H11 v 1H12 and 0.5% in 2H11 v 2H12 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FY12 Results Presentation Page 9
Significant Events post 31 December 12 For personal use only • G8 Education Limited raised $35m through a placement to institutional and sophisticated investors resulting in the issue of 24,137,931 shares. The placement was completed on 13 February 2013 at $1.45 per share. • Contracted to acquire 12 childcare centres for $18.7m which represents 4 times anticipated EBIT for the 12 months post completion. The purchase price is structured with $16.6m paid at settlement and a further payment of $2.1m conditional upon centre based EBIT targets being achieved in the 12 months post settlement. The centres are located in New South Wales and Victoria. • A 25% increase in the dividend from 8 cents per annum fully franked to 10 cents per annum fully franked was announced effective from the March 2013 quarterly dividend. FY12 Results Presentation Page 10
Operational Updates For personal use only • At 31 December 2012 the group had 13,421 licenced places per day and employed 4,204 employees. • The Australian centres are currently in the process of being assessed and rated under the new National Quality Standards. 24 Centres have currently been assessed across 169 Quality Areas. • The group employee retention rate for permanent staff improved 5% when compared to 2011. Retention rates are well above the industry average. • Under the National Quality Standards each childcare centre must have a bachelor qualified teacher by 2014. G8 Education currently has 157 teachers across 99 centres and continues to recruit bachelor qualified teachers. • The continued focus on providing a quality kindergarten curriculum has resulted in 43 centres being approved by the relevant state authority to receive kindergarten funding with a further 31 centres pre approved. Funding for the preapproved sites will commence upon recruitment of a bachelor qualified teacher. This funding is available in QLD, VIC and SA. The funding received has been applied to employ quality teachers, improve existing facilities and development of existing curriculum framework. FY12 Results Presentation Page 11
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