G8 Education possesses confirmed that operating profit before interest and tax (EBIT) for the first quarter of 2022 will be significantly lower than in the same period last year than Omicron, flooding and labor shortages and the absence of Additional government support combine to affect performance.
Q1 2022 EBIT is now expected to be $1 million, compared to $17 million recorded in 2021, with $6 million of the decline attributed to a significant increase in extended variance fee waivers to support families and $5 million in the absence of any additional COVID government grants this year.
An additional $2 million was attributed to increased employment costs due to the additional use of agency staff caused by sick leave and general labor shortages, the balance consisting of revenue and occupancy impacts associated with Omicron and the first quarter flooding.
“The combination of increased Omicron cases and devastating flooding made the first quarter very challenging,” said Gary Caroll, CEO.
“We recognize the need to remain disciplined, robust and resilient as an organization and believe that the measures we are implementing are prudent and will bring short and long-term benefits to society. “
Support desk cost savings take priority, center network must remain supported
Given the difficult environment, the G8 has launched an additional cost reduction program with a target of savings between 13 and 15 million dollars during the year 2022.
The program will primarily focus on identifying opportunities to streamline costs at the support desk level while maintaining the continuous flow of resources to the wider center network, with the provision of in-centre resources, support for pedagogy and practice and pre-announced capital expenditures proceeding as planned. .
Additionally, G8 has confirmed an adjustment to the delivery structure of its Center Improvement Program which is expected to see approximately 140 Centers refreshed over the course of 2022.
Moving from a centralized structure coordinated by a support office to a business-as-usual approach in which practices and capabilities are integrated at the center level should result in cost and execution savings.
“These actions are appropriate in the current environment and at this stage of our transformation program, allowing us to continue to deliver the highest quality outcomes for families with a more sustainable cost base,” Mr. Carroll said.
Occupancy levels lag last year, but gap narrows at end of quarter
As of April 3, 2022, occupancy levels were 0.8% lower than the same period last year, a significant improvement from the 2.1% lag experienced in early March when flooding in the northern New South Wales and Queensland have really started to impact the network.
The overall occupancy rate is currently around 66% across the entire network compared to the low point recorded at the beginning of February of 62%.
Sounding a note of optimism about the prospects for enrollment growth in the coming weeks, the G8 noted in the statement that while it continues to see some level of delayed enrollment, “there has been an increase in conversions over the past three weeks and there remains an encouraging pipeline of inquiries to drive occupancy recovery.
The Group will provide a further trading update at its Annual General Meeting on April 27, 2022.
To access the statement, please see here.