Listed child care operator G8 Education Ltd (ASX: GEM) has on Monday morning announced a record profit for the 12 months ending December 31.
Here are the highlights:
- Revenue increased 44% to $706 million
- Underlying earnings before interest and tax (EBIT) increased 45% to $145 million
- Like-for-like EBIT increased 11%
- Like-for-like EBIT margin increased from 22.8% to 23.8%
- Underlying net profit after tax increased 44% to $87 million
- Underlying earnings per share (EPS) increased 29% to 23.9 cents per share
- Full year dividends totalling 24 cents per share were paid
- During the year 44 child care centres were acquired by G8 taking the total number of owned centres to 489 with a combined capacity of 35,211 places
- Also of note was the resignation of the Chief Financial Officer, Mr Christopher Sacre as an employee of G8 but his continuing involvement with the company as a supplier of services and an independent contractor.
What lies ahead?
According to one analyst consensus forecast, G8 was expected to earn 25.2 cents per share in 2015 (statutory EPS was 24.3 cps in 2015) with a 2016 forecast for EPS of 27 cps. (Source: Thomson Consensus Estimates)
With the share price at $3.41 this implies a forward price-to-earnings ratio of 12.6 times which wouldn't appear to be demanding compared with market averages and particularly when considering G8's corporate objective includes to generate double-digit EPS growth and to spend between $50 million and $150 million on child care centre acquisitions during 2016.
Despite the seemingly undemanding relative market multiple of G8, investors should also consider for comparison the long term business performance and historic and current peer multiples of other businesses operating with specific roll-up strategies like Greencross Limited (ASX: GXL) and Primary Health Care Limited (ASX: PRY) as part of their due diligence.
