These results are quite good, considering that GEM didn't have as many acquisitions as the market expected earlier in the year, and it was distracted by the Affinity deal.
Here are comparisons with consensus (Thomson/Reuters from mid-Jan 2016 -- 10 brokers). I compared reported with underlying results, but I suspect consensus are the predicted statutory results. If so, the statutory results are also shown.
My thoughts on some poster comments:
QUOTE: "LFLs were really ordinary"
FACT: Overall LFL increased by 11% from 2014 (slide 12). No expert would call that level of organic growth "really ordinary". Most firms are lucky to eek out mid to upper single digit LFL growth, especially in services.
QUOTE: GEM sp dropped (Monday early hours), likely due to results or limited guidance
FACT: Cannaccord suggested (mid-morning) that the results were fine, but the market reacted to the CFO leaving. GEM partly recovered throughout the day. The guidance wasn't limited (but not wordy, either). It stated (a) double digit growth, (b) $50m-$150m in acquisitions, and (c) keep debt to EBITDA at or below 2x.
Why the CFO left is an interesting question. Could be: (a) he wanted a new role with more entrepreneurial bent, (b) the new chair and new board member are highly skilled accountants/financiers and might prefer a CFO with a stronger skills set, or (c) none of the above.
QUOTE: FY15 metrics aren't as useful due to staff-to-child ratios change in FY16.
FACT: Partly true. But several months ago GEM provided fairly precise metric effects of the new regulations, so we can adjust from those numbers. Also, GEM's outlook is for double digit growth, which would include the effect of ratios (but doesn't indicate effect on margins).
Closing quote from Canaccord (approx noon Monday): "G8 Education's guidance for double-digit earnings per share growth should be easily achievable, as acquisitions made in 2015 are likely to contribute A$20 million-A$21 million to earnings before interest and taxes in 2016. That implies 14% growth on the previous year."
GEM Price at posting:
$3.30 Sentiment: Buy Disclosure: Held
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