Financial Analysis and Performance of G8 Education Limited

This report provides a comprehensive financial analysis of G8 Education Limited, an ASX-listed childcare center operator. The analysis begins with an introduction to G8 Education, its operations, and its position in the childcare industry. It then delves into an industry analysis, assessing the competitive landscape and applying Porter's Five Forces to evaluate the company's position. The report examines the rivalry among firms, the threat of new entrants, and the bargaining power of suppliers and buyers. A financial analysis follows, including an examination of the statement of financial position, profit and loss account, and cash flow statement. The report evaluates the company's financial performance, including profitability, debt position, and liquidity. An accounting analysis assesses the quality of the financial statements, including auditing practices. The report concludes with an overall assessment of G8 Education's financial health, highlighting areas of strength and potential areas for improvement. The analysis is based on the provided financial statements and relevant information about the company's operations. The report aims to provide insights into the risks and profit potential of G8 Education, making it a valuable resource for students studying financial statement analysis.

Running Head: G8 EDUCATION ANALYSIS 1
G8 EDUCATION ANALYSIS

G8 EDUCATION ANALYSIS
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Contents
Introduction.................................................................................................................................................3
Industrial Analysis.......................................................................................................................................3
Rivalry Amongst the firms......................................................................................................................3
Threat of new entrants.............................................................................................................................4
Bargaining power of the Suppliers..........................................................................................................4
Cost Analysis and bargaining power of the buyers..................................................................................4
Financial Analysis.......................................................................................................................................5
Accounting Analysis...................................................................................................................................7
Conclusion...................................................................................................................................................7
References...................................................................................................................................................8

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Introduction
G8 Education Limited is a flagship of the child care center, which provides the quality
care and education facilities across Australia and Singapore via range of well-respected and
recognized brands from all over the world. Over the years there has been a change in the working
style of G8 education. The company has acquired 16 new centers in the year 2018, whereas 137
centers were refurbished in the year 2018. The major of the company is to provide the quality
services to the customers on the basis of the pillars such as the growth and the sustainability. The
ticker under the Australian Securities Exchange is GEM. Earlier the name of the company was
Early Learning Services Limited. Thereafter the company merged with the Payce Child Care Pty
Ltd, to form the new identity G8 Education Limited. The current revenue of the company is $
and the company is operating with the team of 9927 employees at present. The key person
associated with the G8 education limited is Jason Roberts (G8 Education, 2018).
Industrial Analysis
Rivalry Amongst the firms
There is a high level of competition among the child care centers and different centers
have different strategies to attract the parents. The parents can be attracted on the basis of the
superior level services catered to their child, the staff to child ratio, the quality of the operations
at the center and the aesthetic surroundings as well. There are many long day care centers that
provide the education services as well and this is expected to increase and accelerate due to the
trends and the value addition by each center (Aiginger & Vogel, 2015). G8 Education is
therefore under the threat of being replaced against the small centers that are first close to the
homes of the families and second better catering of the services to the child along with the pre
education facility. The prospective growth rate is high and the people are becoming more
comfortable with the day care centers. Further the evidences have also reflected that after the
collapse of the ABC learning Centre people have become more aware and they trust only those
centers they have opted at the earlier stage. The competition is strong internally rather than the
external competition (Balliauw, Verlinden, De Croocq, Fobe & Van Den Spiegel, 2018).

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Threat of new entrants
Entering in the industry has become one of the most easiest in the industry of the child
acre and centers and this also changes with from easy too hard to easy mediums depending upon
the size and the nature of the business. The competitors like ABC learning and Affinity
Education Group are the top competitors of the company. After the collapse of the ABC learning
there was a high rate of the proliferation of the small center operations as well and fro there
onwards there is a minimal threat of entry as the major player has been removed. Also there are
cheap centers in the market that are available on purchase and rent (Mishra, 2015). The most
important feature of the threat to the new entrants is that the cost of the purchasing or building
the center can be prohibitive to the new entrant. The substantial costs are huge for providing the
modern facilities and the equipment for the play and learning. Hence the threat is minimal
(Benevento, et al 2017).
Bargaining power of the Suppliers
The market share concentration has been low, prior to the collapse of the ABC learning
and nowG8 education has become such a giant name in Australia that industry started to be the
highly concentrated by the 30% share off the revenue after the year 22007 and 2008. The barging
power in this scenario is low in case of the suppliers as there are different government subsidies
available to the child care center and the clients can get easy access at one place. There are wide
range of the centers and the suppliers are low hence the clients also have the limited number of
options (Mathooko & Ogutu, 2015). This can be improved for the G8 education by building he
supply chain with the enormous number of suppliers, experiment the product design and with the
assistance of different and the innovative equipment.
Cost Analysis and bargaining power of the buyers
Within a substantial margin the wages are the largest cost of the players in the Child care
Centre industry. The staff related costs itself consumes up to 63.55% and in such a scenario the
customers have become more aware. They are demanding more services and that too of the
innovative nature (Zhao, Zuo, Wu, Yan & Zillante, 2016). The customer base is small and
therefore the higher the bargaining power the higher will be the ability to seek more discounts
and the innovative offers.

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Financial Analysis
Statement of the financial position is the reports the assets and the liabilities and equity of
the company for a particular period of time. Assets are the resources that are kept on the right
side of the balance sheet as a result of the past events and from which the economic benefits are
realized (Pek-Greer & Wallace, 2017). The liabilities are kept on the left side of the balance
sheet. The assets are separated into two categories namely the current assets and the non-current
assets. The current assets amounted to $116980 and the non-current assets are $1269569. The
total assets however, amounted to $1386549. While analyzing the assets section of the G8
education limited the cash have been employed and the property, plant and Equipment have been
increased by $28000. The intangible have also been increased from $1087969 to $1134456. The
other non-current assets have been decreased eventually from the year 2017, to year 2018 .
Liabilities are the contractual obligations that are required to be paid by the company at a
particular point of time. The liabilities are also bifurcated into the two major categories namely
the Current liabilities and the non-current liabilities (Pek-Greer, Wallace & Al-Ansaari, 2016).
The current liabilities are having been just doubled in comparison to the previous year. In the
year 2017 the current liabilities have been the$151058, whereas the same accelerated to
$386682. The manor increases can be seen in the trade payables and the borrowings. The
company borrowed $230000 altogether from the current sources to operate the business. The
contractual liabilities of the short term nature have been reduced eventually. Whilst observing the
non-current liabilities the other payables have been increased from $1067 to $5260. However the
long term borrowings saw a fall from $253589 to $92188 (Easton & Sommers, 2018).
The overall balance sheet suggests that the assets have been brought into the firm to run
the operations and the long term liabilities have been paid off. The statement of the profit and
loss account is prepare to report the profitability of the company and the returns the investors can
get in return after the payment of the regular operating as well as the non-operating expenses
(Swartz, et al 2018).The income statement sis bifurcated into the two broad categories namely
the revenue and the expenses. The total revenue of the G8 education Limited was $796806 and
the same have been increased from $851530 due to increase in the revenue. The expenses on the
other had are bifurcated and as such no major increase was found individually. Overall the
company’s total expenses have been increased from $679025 to $754547 (Robinson, Henr, Pirie,

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& Broihahn, 2015). After the payment of the expenses the basic earnings per share have been
decreased in comparison to the previous year. In the year 2017 the EPS was 18.92 and the same
decreased only because of the increase in operating costs. The EPS for the current year is 15.87
which mean the investors are getting the low share in comparison of the previous year. The
employment costs forms the 60% of the revenue earned and this can be reduced by the G8, by
replacing them with those women who have no families so they have full time to take care of the
child in the center (DeFusco, McLeavey, Pinto, Anson & Runkle, 2015).
Lastly the company prepared the annual cash flows that are divided into the three main
categories namely, the cash flow from operating activities, cash flow from investing activities
and the cash flow from financing activities. Further the net cash flow from the operating
activities saw a jump from 92011 to 105947 (Weber, 2018). The major reasons for the increase
are the small liabilities have been paid off and the receipts have been increased as there is more
demand from parents. The figure also decreased due the better deals and negotiation from the
suppliers. The cash flow from the investing activities also increased as the G8 purchased the new
equipment of $18387 which includes the play toys and the other assets. The overall cash from
financing activities have been increased from $86212 to $92810. Lastly the cash flow from the
financing activities suggests that the company has sold the shares of the company and debt issue
costs have become nil (Gordon, Henry, Jorgensen & Linthicum, 2017). The dividends saw a fall
from $62787 to $48131, due to the selling of the shares. The repayment of the corporate notes
from $70000 to $50000 again reflects the company is having enough cash to pay back the
liabilities. The company on one hand cleared out the expenses and on other hand the borrowings
are invited in excess by $95000. The outflows of the borrowings have also taken pace from
$51204 to $103981. Overall even after making the payments the cash in hand is $55521 for the
financial year 2018.
In terms of the profitability the company is performing well, the company managed to
secure the returns of 8% on profit and none of the costs have been reduced. The debt position on
the other hand of the G8 education is 0.43 indicating the debt position. The high ratio indicates
the ability of the company to pay the debts and the business tends to be more reliant on the
borrowed funds than it is in terms of the comparison of the equity. In terms of the Liquidity, the
company has the ratio of 0.30 and it is very far from the normal benchmark. The operating

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income is 93% yet the company is able to make the slow profits due to the increase in the
employments costs. The company also has the sound capacity to pay back the finance cost and
that’s why the overall coverage is sound at 3.35 times (Jouppi, at al 2017).
Accounting Analysis
From the analysis of the annual reports, the auditing of the financial statements has been
done by the Ernst and Young. The annual reports have been complied with the section 237 of the
Corporations Act, 2001. Apart from this the Directors report have also been issued which reflects
the fair view and the view which is free from the bias. The director reports have also been read
by the Ernst and Young to give the material free opinion on the financial statements. As stated in
the Annual report the financial statements are free from material misstatements and the financial
statement is reliable and factual (G8 Education, 2018).
Conclusion
From the above analysis it can be stated that the G8 education is performing well yet the
improvements can be made to grab the greater share market. The successful areas of the
company are debt to equity ratio, the operating profit, the debt to services ratio. On the hand the
areas that need severe improvement are the liquidity position, the return to the investors and the
cash flow from investing activities. The company has the strong future prospects for the growth
and whereas the companies shall manage the operation of the costs.

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