The Think Childcare Ltd (ASX: TNK) share price grew by 9.45% today after investors saw its report.
Here are the numbers for the full year report, compared to last year:
- Revenue up 23% to $66.89 million
- Earnings before interest, tax, depreciation and amortisation (EBITDA) up 23% to $10.45 million
- Net profit after tax (NPAT) up 11% to $5.9 million
- Earnings per share (EPS) up 7% to 14.08 cents
- Dividend up 11.1% to 10 cents per share
Think Childcare increased the number of centres from 38 to 43 during the year, an impressive rise of 13% for the year. It also increased the number of licensed places from 3,147 to 3,588.
The average fees per day rose from $103 to $110 whilst the wages to turnover ratio improved from 49.55% to 48.21%.
Management commented on the state of the sector by saying that during the last four years the sector has experienced significant opportunistic investor activity fuelled by cheap money, willing lenders and purchases at inflated multiples from domestic and overseas buyers. The market conditions now reflect a tightening of credit and more considered acquisitions.
The company believes that the sector is now returning to more sustainable numbers.
The concerning thing for me is that nearly of its debt metrics more than doubled. Expansion is good and sometimes debt is better than capital raisings, but it could be dangerous in a rising interest environment.
Outlook
Think Childcare has factored into its 2018 forecast that it will be 'buffeted by some moderate head winds' in the first half until the new childcare package commences in July. The company said that supply remains an issue, so parents are choosing quality, which is why the company is focusing on being the best in the market.
That's why the childcare operator is going to invest $4.5 million in capital expenditure during 2018.
Foolish takeaway
In 2018 management have projected that revenue could grow by 32% and earnings per share could grow by 34%. This would be an excellent result if it can achieve it, considering management mention that it will suffer 'moderate headwinds' in the months ahead.
If the company achieves this then it's only trading at 12x FY18's estimated earnings, which seems like a reasonable price to pay with a grossed-up dividend yield of 6.49%.
