Childcare stock Evolve Education climbs after earnings guidance; plans to hit acquisition trail again
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Evolve Education (ASX:EVO) told shareholders today it had emerged from the first nine months of 2020 with over NZ$14 million in earnings.
But months later, most childcare stocks haven’t seen the doomsday scenario initially feared, and Evolve Education is no different.
The company noted positive trading in both Australia and New Zealand. It said New Zealand was performing particularly well, ahead of company expectations.
It also believes childcare subsidies from both the Australian and New Zealand governments were a godsend, keeping staff employed.
Then it paid a “transition payment” of 25 per cent of fee revenue for two and a half months afterwards – conditional on centres capping their fees at pre-pandemic levels and guaranteeing jobs.
New Zealand provided a similar subsidy scheme too.
Its sector was more heavily hit than Australia’s, after it initially shuttered centres during its nationwide lockdown. But restrictions were eased quickly after the outbreak was brought under control.
Prior to COVID-19, Evolve Education was an active acquirer of businesses. The company raised $83 million throughout 2019 and hoped to spend just over half of that on acquisitions with the other half retiring debt.
While Evolve halted plans when COVID-19 hit, this was not before 10 acquisitions in the second half of 2019.
It now says it has recommenced acquisition activities and was currently considering potential acquisitions, pinpointing $20 million as a ballpark figure.
Its profitable operations in 2020 and cash reserves will pay for this. It said further information would be provided in due course and declined to provide any future guidance.
Evolve shares on the ASX rose 18 per cent this morning but still remain below pre-COVID levels.