HONG KONG FUND INVESTS $212.8 MILLION IN G8 EDUCATION
Written on the 20 February 2017 by Business News Australia
G8 EDUCATION (ASX: GEM) has secured $212.8 million from Hong Kong-based CFCG Investment Partners to pay down debt and fund its continued expansion.
Today's announcement comes alongside the Gold Coast-based childcare operator's full-year results, which include 10.2 per cent growth in revenue to $778.5 million and underlying earnings before interest and tax (EBIT) of $160.7 million, up 10.5 per cent on the previous year.
Underlying net profit after tax (NPAT) is up 7.1 per cent at $93.3 million, but statutory profit is down 9.4 per cent to $80.27 million. The company says profit grew slower than EBIT due to higher financing costs.
CFCG Investment Partners, which has a market capitalisation of HK$13 billion (AU$2.2 billion) on the Hong Kong stock exchange and focuses on investing in the education industry, has subscribed to around 55 million new shares in G8 at $3.88 per share - an 8 per cent premium to the last 30-day volume weighted price.
G8 will use the funds to pay down the $50 million bond facility that is due in February, and the $40 million Bankwest working capital facility that was used to fund acquisitions in the second half of 2016. The company's net debt to EBITDA ratio will decrease from 2.2 times to 1.7 times.
The money will also assist in funding the acquisition of around 49 child care centres, worth around $200 million, in Australia over the next two years.
Managing director, Gary Carroll (pictured), says raising capital will enable G8 to deliver on an additional $100 million of growth opportunities above what was possible from internally generated cash flows.
"This additional $100 million of acquisition activity should add $25 million in annual EBIT upon completion, which when combined with repayment of the relevant debt facilities noted above, would mean that the placement is forecast to add circa 2c to earnings per share," says Carroll, who took over as CEO MD on 1 January.
Carroll's appointment was part of a management shakeup at G8, which included the departure of founding managing director Chris Scott, while former CEO Jason Roberts stepped aside to take up a general manager development role. Sharyn Williams took Carroll's previous position as CFO, and Sarah Zeljko is G8's new general counsel and company secretary.
G8 is trading up 5.06 per cent at $3.74 per share at 11.16am AEDT this morning following the announcements.
The company now owns 510 childcare centres in Australia (490) and Singapore (20) and has total licenced places of 38,713. During 2016, the company settled 19 centres in Australia and two in Singapore for $62.9 million.
"The Group has been successful in closing a number of quality acquisitions in the fourth quarter of 2016," says Carroll.
"We also have a significant pipeline of currently committed acquisition and development transactions and other potential network opportunities."
Carroll is pleased with the 10.5 per cent EBIT growth achieved in 2016, which he says was driven by strong organic growth in the second half and acquisitions performing in line with expectations.
"During the year, we have also invested in our future performance from increased expenditure in centre upgrades and refurbishments, as well as increased staff development. Our debt profile improved during the year, with expiring Singapore bond and bank debt facilities being extended by two years. The FX risks associated with our Singapore bond facilities have been fully hedged."
G8's share price has almost recovered from the steep drop it suffered after the company posted disappointing half year profit in August.
Business News Australia
Author: Business News Australia