The G8 Education Ltd (ASX: GEM) share price is beaten down on Thursday after the company posted its H1 2024 results.
G8 Education shares are currently swapping hands at $1.24 apiece, more than 10% lower on the day as investors react to the company's numbers and outlook.
Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is up less than 1% today.
Let's see what the company posted.
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G8 Education share price plummets after H1 earnings
Here are the key takeaways from the company's annual results:
- Revenue was up 5.5% on the prior year to $480.4 million
- Statutory net profit Increased by 33.6% year over year to $20.0 million
- Operating profit rose 20.5% to $39.4 million
- Group occupancy stood at 68.2%, up 80 basis points from the previous year
- Declared a fully franked interim dividend of 2 cents per share
What else happened in H1 FY 2024?
G8 Education delivered a solid financial performance in the first half of CY24. However, management raised concerns for the remainder of 2024.
During the first half, the company divested 15 centres and surrendered three more as part of its "network optimisation program".
Additionally, two new centres were opened, which G8 is "confident [has] the underlying fundamentals to perform".
Management also highlighted an increase in team retention rates, which rose by 6 percentage points to 76%.
It says this improvement is part of a broader strategy to build team member capability and enhance the overall experience for "families and children" at G8 centres.
The experience for shareholders was enhanced too, with the board increasing the dividend 33% year over year to 2 cents per share.
This is around 81% of the reported net profit, so management decided to share the profit around this half.
However, despite the growth in H1 2024, the company has seen a "softening" in occupancy growth in the second quarter due to lower enquiry levels, a trend that is consistent across the broader sector.
What did management say?
G8 Education's Managing Director and CEO, Pejman Okhovat, acknowledged the challenges ahead.
Our team's strategic cost management and conservative balance sheet approach coupled with
achieving operational efficiencies and positive occupancy results have contributed to the Group's
solid CY24 H1 financial performance.Against the macroeconomic environment, lower enquiries, consistent with the broader sector, have
resulted in occupancy growth softening in Q2. This demands that we maintain our disciplined focus on our team engagement position, improve our family experience including our enrolments and transition, continue to maintain capital and cost disciplines and implement our 'fit core' strategic plan initiatives leading into 2025.
What's next for G8 Education?
Looking ahead, G8 Education anticipates more challenging conditions in the second half of 2024 and into 2025.
G8 is also set to begin an on-market buyback of up to 5% of issued capital as part of its capital management strategy. Management has set a high bar for the remainder of the year:
While our first half result demonstrates our progress against G8 Education's strategy, the Group's
strategic focus to build a stronger and more sustainable business continues as we recognise there is more to do. However, we are encouraged by the Federal Government's recent announcement to fund wage increases for Early Childhood Educators that will support the Early Childhood Education sector.
G8 Education share price snapshot
Investors are punishing the G8 Education share price on Thursday, despite a decent set of half-year accounts. With a more challenging outlook, investors might be spooked.
The stock is up 10% over the past year.
