Evolve shares fall on $32 mln write-down, lower earnings guidance
By Gavin Evans
Nov. 28 (BusinessDesk) - Evolve Education Group shares fell 5 percent after the company wrote $32.1 million off the
value of its child activity centres, announced the sale of two businesses and lowered its earnings forecast for the full
year.
The firm, which operates more than 120 centres around the country, said falling enrolments last year and this year have
reduced the profitability of the portfolio.
While it is confident of improving that during the next three years, an impairment was required.
The write-down saw the firm report a $27.5 million loss for the six months through September, compared with a $4 million
profit a year earlier.
Revenue was marginally higher at $71 million, boosted by a $367,000 gain on the sale of $2.9 million of land and
buildings.
Net profit, excluding one-time items, fell to $4.6 million from $7 million a year earlier. Underlying earnings before
interest, tax, depreciation and amortisation fell to $9.1 million from $12.5 million a year earlier.
Evolve stopped buying properties and signalled in April that it would sell its Porse in-home childcare business as it
struggled with declining enrolments, high staff turnover and flat Ministry of Education funding. It was actively
reviewing the carrying value of assets then.
New chief executive Rosanne Graham started in July and signalled that month that underlying ebitda for the full-year
could be as much as $5 million lower at $16.6 million to $18.6 million before the cost of any remedial measures.
Today the company said earnings would be “marginally” below the bottom of that range. After allowing for $2.9 million of
turnaround costs underlying ebitda would likely fall to between $12 million and $14 million, it said.
Evolve shares fell 2 cents to 38 cents, a record low since its 2014 listing. They have fallen 50 percent this year.
The firm, which isn’t paying an interim dividend, said the Porse sale is expected to be settled by the end of the month.
Six non-core centres are also being marketed for sale.
The company has also agreed the sale of its Au Pair Link business, which in April former chief executive Mark Finlay had
wanted to retain, given it was trading well and serving a distinct market.
Evolve says average occupancy at its mature centres fell to 78 percent in the half-year, down from 80 percent a year
earlier. Occupancy in the March 2017 year had been 82 percent.
An ‘action plan’ has been developed to improve the performance of the 50 weakest centres. The company has also
negotiated more flexible terms from its lenders – ASB – for the next four quarters, but that is tied to a capital review
aimed at getting the firm’s debt-to-ebitda ration below three.
That review is expected to conclude before March and the company said it will consider all options to reduce gearing,
including sale of under-performing assets and alternative sources and debt and equity.
The company also today announced the appointment of Chris Scott and Chris Sacre to the board, replacing Anthony Quirk
and Lynda Reid.
Scott, previously managing director of the G8 Education child care business in Australia, acquired a 19 percent stake in
Evolve from Finlay in August. Sacre was chief operating officer at G8.
(BusinessDesk)
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