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Evolve annual profit falls 25%, matching twice downgraded guidance

Tuesday 1st May 2018

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Evolve Education Group said annual profit fell by about 25 percent, falling within its twice downgraded earnings guidance after failing to meet new enrolment targets and reaffirmed the prospect of a smaller dividend than a year earlier.


The Auckland-based early childhood education group said underlying earnings were about $12 million in the 12 months ended March 31, down from $15.9 million a year earlier. That fell within Evolve's guidance for underlying profit of between $11 million and $12 million, having downgraded the forecast twice after falling short of expected growth in net enrolment numbers. That guidance included a $500,000 charge from start-up losses on new centres that opened in the year. 


Evolve also reaffirmed its expectation of paying a final dividend of 2 cents per share, down from 2.5 cents a year earlier, which it will confirm when formally announcing its results on May 28. 


The company will also book the cost of a $3 million settlement with the Inland Revenue Department over an old GST issue involving its Porse home-based care business, which it subsequently decided to quit. 


"As a decision has been made to divest the Porse business, an impairment of the carrying value of this business is being considered by Evolve’s board and will be finalised prior to the full year earnings announcement," the company said in a statement. "The potential impairment of other intangible assets remains a possibility but is still under consideration by the board." 


Porse accounts for less than 5 percent of Evolve's earnings, and it has previously said it plans to keep its other home-based business Au Pair Link, alongside its early childcare centres (ECEs) - Lollipops Educare and Leaps and Bounds.


Evolve went public in 2014 after selling shares in an initial public offering at $1 apiece, raising $132.3 million to fund the acquisition of several childcare businesses in what was a newly-formed company. The shares rose 2.1 percent to 49 cents. 



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