G8 Education (ASX:GEM) share price spikes 6% as profits snap back in 2021

G8 Education shares are on the move today as the company released its financial results for the full-year ended 31 December 2021.

| More on:
Education with the kids using a tablet for learning

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • G8 Education reported its full year results today
  • It was a period marked by growth in occupancy and earnings, and investors have taken notice today, sending shares well into the green
  • In the last 12 months, the G8 education share price jumped 9% 

Shares in G8 Education Ltd (ASX: GEM) moved higher today after the company released its financial results for the full-year ended 31 December 2021.

At the close on Tuesday, the G8 Education share price finished 5% in the green at $1.27 apiece after releasing its earnings.

G8 share price tanks amid earnings growth

Key takeouts from the company's earnings results today include:

  • Occupancy of 70.9% vs 67.8% in CY20 and 73% in CY19, reflecting strong H1 occupancy performance
  • H2 being heavily impacted by COVID-19 movement restrictions and isolation requirements
  • Operating revenue of $866.3 million compared to $777.1 million in CY20 and $918.9 million in CY19
  • Operating earnings before interest and tax (EBIT) of $80.1 million (after lease interest)
  • Statutory net profit after tax (NPAT) of $45.7 million, up from Net Loss After Tax of $189 million in CY20
  • Net debt of $25.9 million at 31 December 2021
  • CY21 fully franked dividend of 3 cents per share declared, to be paid in April 2022.

What else happened in the last year for G8 Education?

The company says its strong occupancy performance in H1 last year, that was underlined by "the impact of the strategic change programs and re-establishment of the seasonal uplift trend", was disrupted in the second half as a result of COVID-19 lockdowns.

The effect of COVID-19 lockdowns was abundantly clear because those states "not materially impacted by COVID-19, namely Western Australia, South Australia and Queensland" saw occupancy growth, G8 notes.

Operating revenue came in strong at $866 million, around $90 million ahead of FY20 which benefitted from a seasonal uplift trend but again this was levelled off by COVID-19 lockdowns in the back end of 2021.

G8 also had net debt of $25.9 million at 31 December 2021, following a successful refinancing in February 2021. The beefed up balance sheet meant the Group was able to remain resilient and flexible through changing conditions, the release notes.

As a result of this momentum, G8 grew its bottom line from a post-tax loss of $189 million in CY20 to record NPAT of $45.7 million for the year.

Consequently, the board declared a final fully franked dividend of 3 cents per share, to be paid in April 2022.

The company notes this represents a 56% payout of CY21 NPAT and thus fits in line with the Group's dividend policy of 50-70% of NPAT.

In addition to the dividend update, G8 also advised investors of its intention to conduct an on-market buyback of up to 10% of issued capital, determined by a number of balancing factors.

Management commentary

Speaking on the results today, G8 Chief Executive Officer and Managing Director, Gary Carroll said:

Given the challenges presented by COVID-19 throughout the year, I am pleased with the result we have been able to achieve. Occupancy has been impacted right across the sector, and this was particularly felt in the second half as a result of an escalating COVID-19 environment. It has been encouraging to see our enquiry pipeline is strong, and great momentum in the lead indicators for occupancy – quality, family and team engagement – positioning G8 well in the COVID-19 recovery period. The strength of our balance sheet provided us with resilience during this period.

What's next for G8 Education?

G8 notes there are near-term COVID-19 headwinds across the sector, which include unprecedented increase in closures during January 2022 without corresponding Business Continuity Payment support, isolation requirements causing lower attendances or centre closures, delayed enrolments and team member shortages.

However, its enquiry pipeline is strong and is in line with numbers seen back in January 2021. It also feels it is well-positioned to deliver upside in 2022.

"Strong underlying momentum in the portfolio, particularly in occupancy lead indicators, despite the challenging environment, positions the Group well for a COVID-19 normal environment" it said.

G8 Education share price snapshot

In the last 12 months, the G8 education share price jumped 9% and has spiked another 15% since trading recommenced on January 4. In the past month alone, it is up 18%.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Earnings Results

NAB shares tumble 3% after FY24 result disappoints investors

The market isn't liking the big four bank's result today.

Read more »

A man looking at his laptop and thinking.
Earnings Results

NAB share price on watch after FY24 profits sink to $7.1b

How did the big four bank perform during the year?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Earnings Results

Goodman shares fall on Q1 update

How did the company perform in the first quarter? Let's find out.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Earnings Results

Westpac shares on watch amid $6.99b profit and new buyback

Has the big four bank delivered the goods for investors this year? Let's find out.

Read more »

Woman inspecting packages.
Earnings Results

This top 50 ASX stock is diving 5% despite a strong outlook

Investors were looking for more.

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices
Earnings Results

Macquarie share price sinks despite $1.6b half year profit and new buyback

How did this investment bank perform during the first half? Let's find out.

Read more »

A woman holds her hand out under a graphic hologram image of a human brain with brightly lit segments and section points.
Earnings Results

Why the BrainChip share price is in the spotlight this week

Today's reaction is in stark contrast to the day of the release.

Read more »

Shot of a scientist using a computer while conducting research in a laboratory.
Healthcare Shares

2 All Ords ASX healthcare shares making BIG moves on quarterly updates

These two ASX healthcare companies are seeing heavy trading on Thursday.

Read more »