G8 Education (ASX:GEM) share price slips despite half-year profit surge

Why shares in the Aussie childhood education group could be worth watching today

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The G8 Education Ltd (ASX: GEM) share price has fallen in early trade. The soft start to the week comes despite the childhood education group reporting a surge in profits after a COVID-affected 2020.

At the time of writing, the G8 Education share price is down 2.86% trading at $1.02.

G8 Education share price slumps despite profit surge

Shares in the Aussie early childhood education provider are sliding after the company's half-year results release. Some of the key takeaways from 1H 2021 include:

  • Revenue up 36.8% on the prior corresponding period (pcp) to $421.5 million
  • Statutory net profit after tax (NPAT) of $25.1 million compared to a $244.1 million net loss in 1H 2020
  • Operating earnings before interest, tax, depreciation and amortisation (EBITDA) up 15.2% to $102.4 million
  • Basic earnings per share of 6.5 cents, compared to a 62.5 cents per share loss in 1H 2020
  • No interim dividend

Investors are likely to keep an eye on the G8 Education share price today after the company announced intentions to pay a full-year dividend at year-end.

What happened in first-half FY21 for G8 Education?

COVID-19 restrictions were disruptive to operations throughout the half. Core occupancy levels recovered from 65.1% in 1H 2020 (on a restated basis) to 68.0% in the most recent half-year period.

The group's 191 regional centres performed strongly with occupancy levels up 4.4% than the COVID-19 impacted 1H 2020 result.

G8 reported a strong balance sheet (with a net cash position) to help ride out the COVID-19 storm. Management has also signalled its intention to pay a full-year dividend for the period ended 31 December 2021.

The G8 Education share price fell 16.7% from the start of the year through to 30 June.

What did management say?

G8 CEO and managing director Gary Caroll had this to say about the result:

During the half, our operating performance continued to recover, with occupancy in the first half narrowing the gap on CY19, driven by our strategic change programs and a particularly strong performance from our regional centres.

Costs were well-managed, and we remain concentrated on maintaining our balance sheet strength and flexibility.

After an encouraging first half, since June, we have started to see some impact of COVID-19 lockdowns on occupancy in the eastern states.

We have the right settings and systems in place, and are well-capitalised to weather this period and emerge in a strong position.

What's next for G8 Education and its share price?

COVID-19 restrictions across the country continue to impact G8's operations in FY22.

The G8 Education share price is slipping today as management sets its sights on an end-of-year dividend.

Shares in the Aussie early childhood education provider are down 14% this year and underperforming the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Ken Hall 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.

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