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.

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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.

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