What Happened? Not long before the close of business yesterday, Australia's largest listed childcare centre operator G8 Education Ltd (ASX: GEM) announced that current CEO Jason Roberts and Managing Director Chris Scott would be replaced on 1 January 2017 with recently appointed CFO Gary Carroll, who started with G8 on 25 July following the resignation of the previous CFO in May this year.
Why? The change comes only a week after a pleasing trading update where Mr Scott reported that G8 expects its full-year Earnings Before Interest and Tax (EBIT) to be between $158 million and $162 million, around flat on last year.
One would assume that the change at the top has to do with simplifying the management structure and bringing in a fresh set of eyes, while retaining the significant skills of Mr Scott and Mr Roberts.
Chairman Mark Johnson said: "With the assistance of executive search firm, Spencer Stuart, the Board has undertaken a thorough assessment of internal candidates and the relevant external market. Gary Carroll was successful in that process"
Chris Scott will remain as an Executive Director of the Company, while Jason Roberts, will transition into a General Manager – Development role, "where he will lead the establishment of a dedicated team to drive development of the Group's network and other revenue growth opportunities."
What now? Gary Carroll will pocket a base pay of $750,000 with short and long term incentives that appear quite generous. The company will start again to find their second CFO in a year, which hopefully will be easy for a company with a strong foundation like G8.
Pleasingly for investors, the idea that the CFO has become the CEO could be a good sign that the company is set for greater things than its ultimately unsuccessful predecessor ABC Learning. Mr Carroll would have had a good insight into the company's financials over the last 6 months and obviously feels that he can add to the future of the company.
A big question will be: "Can the new CEO invigorate growth in the company again?"
As my colleague said previously: "Fortunately G8 is already priced for minimal growth, and in my opinion the company is pretty good value today – a low price and a strong dividend, combined with demonstrable proof of being able to maintain margins over the past five years. Investors do need to be aware of what they're buying, however, and growth doesn't appear to be on the menu."
