G8 Education (GEM) H2 2024 earnings summary

Executive summary

• Achieved strong revenue and earnings growth in CY24, with statutory NPAT up 20.8% to $67.7 million and operating EBIT up 14.3% to $115.0 million, supported by robust operational execution and portfolio optimization despite sector challenges from inflation and cost of living pressures.

• Occupancy increased by 0.3 percentage points year-over-year to 70.7%, outperforming the sector, though H2 softened due to affordability pressures.

• Significant improvements in team retention and engagement, with a 10% government-funded pay rise secured for centre staff in December 2024 and a further 5% in December 2025.

• Network optimisation included divestment of 18 underperforming centres, surrender of 19 leases, and opening of 3 new locations.

• Balance sheet remains conservative with strong cash conversion, low leverage, and ongoing share buyback program.

Financial highlights

• Statutory revenue rose 3.5% to $1,021.8 million; group operating revenue grew 3.3% to $1,017.7 million.

• Operating EBIT up 14.3% to $115.0 million; operating margin improved by 1.1 percentage points.

• Net profit after tax increased 20.8% to $67.7 million; EPS up 21.1% to 8.4 cents.

• Fully franked final dividend of 5.5 cents per share, up 22.2% year-over-year, representing a 65% payout ratio.

• Free cash flow for the year was $60 million; operating cash flow $133 million with cash conversion over 100%.

Outlook and guidance

• Cautiously optimistic for CY25, expecting improved macro factors such as increased female workforce participation, easing inflation, and lower interest rates to support demand.

• Fee increase of 4.32% implemented in January 2025 to offset inflation.

• CapEx for CY25 projected at $45 million, including $7 million rolled over from CY24.

• Anticipate positive impact from government policy changes, including a three-day subsidised childcare guarantee from January 2026.

• Share buyback and network optimisation to continue in CY25.