Mayfield Childcare : Financial Results for the Full Year Ended 31 December 2021

23 February 2022

For personal use only

Mayfield Childcare Limited

Financial Results for the Full Year ended 31 December 2021

Mayfield Childcare Limited (ASX:MFD) is pleased to announce its results for the Calendar Year 2021.

Statutory revenue before stimulus package income was $38.6m (up 56.2%). With the addition of various Industry Support Packages, totalling $1.4m, revenue was $40.0m (up 7.9%), delivering Net Profit After Tax (NPAT) of $2.6m (down 31.2%).

Net Profit after Tax (NPAT), includes $1.1m of one-off transaction costs associated with the acquisition of the 14 Genius Learning childcare centres, adjusting for these costs results in NPAT of $3.6m, (down 2.9%) to CY 2020.

Reversing the application of AASB 16 Leases, Underlying Results are as follows:

CY 2021 Full Year Underlying Results:		CY 2021		CY 2020		PCP Variance %
	Revenue from continuing operations		$38.6m		$24.7m		+56.2%
	Industry Support & Gov't Stimulus Packages		$1.4m		$12.4m	(88.5%)
	Total Revenue		$40.0m		$37.1m	+7.9%
	Centre EBITDA		$9.6m		$9.3m	+4.0%
	Group EBITDA		$7.0m		$6.8m	+3.7%
	Group EBIT		$6.3m		$6.2m	+1.6%
	NPAT		$4.2m		$4.5m		(4.6%)

Mayfield Childcare has again exceeded market expectations, notwithstanding the fact that the CY 2021 year has proven to be the tale of two halves, characterised by the level of restrictions and challenges associated with the COVID-19 pandemic, faced by our communities, our people, and the economy.

The first half of CY 2021 was a stark contrast to the previous 12 month reflecting a more normalised trading environment, COVID restrictions lifting, with families accustomed to the new 'COVID Normal', stabilising attendance rates and occupancy progressively strengthening, all the signs of a welcomed recovery from 2020.

Unfortunately, this operating environment was to be short lived with Victoria plunged back into lockdown from mid-July. Once again, our families were confronted with 18 weeks of COVID restrictions, including restrictions on access to childcare and permits for authorised workers, all of which restrained the recovery growth experienced during the first half.

Mayfield Childcare Limited Suite 2, 207-213 Waverley Road Malvern East, VIC 3145 PO Box 2214 Wattletree Road Malvern East, VIC 3145 Phone: [phone]

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CY 2021 In Review

As the country worked its way out of a gruelling 2020 year with the extraordinary situation and challenges imposed on our community and economy with the COVID-19 pandemic, expectations were for a return to pre-COVID operating performance levels.

While there were some lingering restrictions around return-to-work levels for private office and public service workers during the month of January, there was an overwhelming desire by our families to get back to a sense of normality, with an end to home schooling and a return to childcare.

The business experienced solid occupancy growth during the first half, attendance levels normalised, many of the educational and care activities associated with childcare that had been put on hold during 2020 were re-activated, and our capital centre improvement programs recommenced.

On the back of this recovery performance and reflecting the underlying strength of the business, the Board announced its inaugural interim fully franked dividend of 2.47 cents per share.

Late in the first half, Mayfield negotiated the acquisition of two Victorian based centres, with a combined

12-month EBITDA forecast of $985K, reflecting an average 4.3x purchase multiple, though settlements were to occur in the second half of the year.

The return to state-wide lockdowns in July, particularly in Victoria, defined a very different second half for the Early Childhood Education and Care sector, and the Mayfield business. An initial 7-day snap lockdown, turned into 18 weeks of work from home orders, restrictions on access to childcare and permits for authorised workers, along with a return to home schooling. All of which stemmed the occupancy growth experienced during the first half, along with operators once again supporting families with the waiving of parent co-payments for non-attendance.

Now well experienced in the management of the COVID-19 pandemic at centre level, the business implemented its protective strategies both around the health and safety needs of our children and our team of educators, while safeguarding the economics of the business and continuity of operations. This experience also extended to our families who were now accustomed to the new 'COVID Normal' in dealing with permit requirements to access childcare, if eligible.

The Federal Government initiated funding support for operators, with the introduction of the Business Continuity Package.

ECEC Business Continuity Package

Announced on 23 August, the ECEC Business Continuity package provided operators, if eligible, with 10-weeks of support payments, structured over 5 fortnights, equal to 25% of their fee revenue based on a pre-determined reference period.

To be eligible, attendance levels for each fortnight had to be below 50%, operators were to waive the gap-payment made by parents who didn't attend, with no fee increase during the period.

While the business welcomed the funding support, for Mayfield and many operators generally, not all childcare services would qualify, based on the attendance eligibility requirement. Though there was a clear expectation from parents, that regardless, the gap-payment would be waived for non-attendance, as had been the case since the start of the pandemic.

Mayfield Childcare Limited Suite 2, 207-213 Waverley Road Malvern East, VIC 3145 PO Box 2214 Wattletree Road Malvern East, VIC 3145 Phone: [phone]

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Genius Learning Acquisition

The acquisition of the 14 Genius Learning childcare centres, which was completed by the end of December, heralds an exciting new phase of operations and growth for Mayfield, as the business expands its operations around Australia. This transformational acquisition, along with the 2 centre acquisitions earlier in the year, now positions Mayfield as a leading Australian childcare operator, with a portfolio of 36 centres across Victoria, Queensland, and South Australia.

Further, the incubator arrangements that Mayfield and Genius have entered into, will deliver certainty of growth, providing ongoing and exclusive access to a pipeline of premium, high performing centres.

Representing a substantial step change in the business both physically and economically, the overwhelming support received from existing shareholders, and new institutional investors, is testament to the value this transaction represents to Mayfield's future growth.

CY 2021 Key Underlying Operational Results:

Acquisition Growth: +16	• 16 new centres acquired - 7 in Victoria, 8 in Queensland and 1 in South
	Australia
	• Significant change in the size, scale and geographical footprint.
Occupancy: 70.1%	• Up 2.9% vs pcp.
	• Weekly occupancy trended from 64.0% in January to 75.2% in December.
Revenue: $40.0m	• Up 7.9% vs pcp, reflecting occupancy growth, government support
	payments and acquisitions.
Total Wages: $22.4m	• Up 9.6% vs pcp.
	• The 2020 year was lower due to lower attendance levels.
EBIT: $6.3m	• Up 1.6% vs pcp, though with a slight drop in centre operating margins of
	0.9% to 24.1%.
NPAT: $4.2m	• Down 4.6% vs pcp, reflecting flow-through of EBIT performance, offset by
	depreciation and effective tax rate increases.
Net Debt: $6.2m	• Down $2.1m or 25.6% on pcp,
	• Cash holdings of $2.3m and available loan facilities of $21.9m.
Net Assets: $67.1m	• Up $36.1m reflecting 2021 acquisitions of 16 centres.
ACECQA Quality Rating	• 90% of services rated Meeting or Exceeding the National Quality
	Framework.

Mindful of the recent substantial increase in issued capital in determining the dividend, the Board has elected to reverse the impact of the one-off Genius acquisition costs and, as such, is pleased to announce a final fully franked divided of 2.00 cents per share (cps) payable in April 2022. The Board recommends your consideration of the Dividend Reinvestment Plan (DRP). Shareholders who elect to take shares instead of cash under the DRP will receive shares at a discount of 5% to the VWAP share price over the pricing period.

Mayfield Childcare Limited Suite 2, 207-213 Waverley Road Malvern East, VIC 3145 PO Box 2214 Wattletree Road Malvern East, VIC 3145 Phone: [phone]

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CY 2022 Outlook

The 2021 year has heralded a significant step change in the business with 16 new centres acquired, positioning Mayfield as a leading Australian childcare operator with a portfolio of premium centres and a strong growth pipeline. The estimated incremental earnings of $8.0m EBITDA for CY22 from the Genius transaction will substantially increase the financial scale and balance sheet strength of the business.

Future acquisitions opportunities associated with the incubator arrangements between Mayfield and Genius are under assessment, with new additions to the portfolio expected early in the second half of 2022.

The rapid spread of the Omicron strain amongst our parents, our children, and our educators has presented a new set of challenges for the business. Increased levels of isolation, along with extended work from home arrangements amongst families, is causing a slower return of exiting families to childcare, and a more cautious approach to starting childcare for new families.

While the business has seen small occupancy gains compared to the beginning of the 2021 year, we expect the trading environment to be tempered in the short term as the impact of Omicron moderates.

The Federal government's revised Child Care Subsidy policy announced in December 2021, which provides increased subsidies for families with two or more children, while removing the subsidy cap for all families, will further contribute to the positive underlying demand trends for the sector, stimulating growth during 2022.

Mayfield Childcare Chief Executive Officer Dean Clarke said:

"The business has performed extremely well despite the challenges we continue to face with COVID and the restrictions placed on our communities and economy. The recovery we experienced in the first half was certainly dampened in the second half, though the resilience of our people and strength of the business has again shone through."

"The acquisitions secured in 2021 are a great step forward for the Mayfield business that substantially change the economics and financial standing of our business. This is an exciting time for the business as we expand around Australia and with the strength of our balance sheet, and increased debt capacity, we are well placed to leverage the incubator growth opportunities that we have entered into with Genius."

Please direct any further enquiries to:

	Dean Clarke		Glenn Raines		Andrew Angus
	Chief Executive Officer		Chief Financial Officer		Investor Relations
	[e-mail]		[e-mail]		[e-mail]
[phone]		[phone]		[phone]

Mayfield Childcare Limited

Suite 2, 207-213 Waverley Road Malvern East, VIC 3145

PO Box 2214 Wattletree Road Malvern East, VIC 3145

Phone: [phone]

For personal use only

ASX Preliminary Final Report

Year ended 31 December 2021

Lodged with the ASX under Listing Rule 4.3A

Contents

	Page
Results for announcement to the market	2
Net tangible assets	3
Control over other entities	3
Associates and joint venture entities	3
Compliance statement	3
Preliminary financial statements
Preliminary statement of profit or loss and other comprehensive income	5
Preliminary statement of financial position	6
Preliminary statement of changes in equity	7
Preliminary statement of cash flows	8
Notes to and forming part of the preliminary financial statements	9

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