Mayfield Childcare Limited reports a significant operational and financial turnaround in Q2 FY25 under new CEO Daniel Stone, with improved earnings and cost efficiencies despite ongoing sector pressures.
- Group occupancy edges up 1.7% in Q2 FY25 weekly reporting
- Wage to revenue ratio cut by 6 percentage points to 62.7%
- Underlying centre EBITDA margin doubles to 12.0%
- Annualised overhead savings of $1.1 million achieved
- Divestment strategy under review amid improved profitability
Navigating Sector Headwinds
Mayfield Childcare Limited has been grappling with a challenging environment marked by declining occupancy and rising costs, common across the childcare sector. The first quarter of fiscal 2025 saw occupancy dip to 54.3%, down from 58.5% the previous year, reflecting broader cost-of-living pressures on families and a slow start to the calendar year’s enrolments.
Despite these headwinds, the company’s new leadership under CEO Daniel Stone, who took the helm in late March 2025, has initiated a strategic reset that is already showing promising results.
Operational Turnaround Gains Traction
Since the start of Q2 FY25, Mayfield has implemented targeted programs focusing on operational efficiency and cost discipline. Key among these is a reduction in the wage to revenue ratio by 6 percentage points to 62.7%, achieved through enhanced rostering and labour planning. This improvement is critical in a labour-intensive sector where wages represent a significant cost.
Underlying centre EBITDA margins have surged to 12.0%, a remarkable 172% increase in weekly EBITDA contribution over the first four weeks of the turnaround. This margin improvement is complemented by overhead reductions amounting to $1.1 million annually and ongoing contract renegotiations targeting $1.5 million in savings.
Portfolio Performance and Strategic Reassessment
While the Mayfield portfolio excluding the Precious Cargo centres shows encouraging signs with a 14.0% EBITDA margin, the Precious Cargo segment continues to underperform due to legacy integration issues. This drag on overall results has prompted management to reassess the previously planned divestment of 10 centres. The recent profitability gains have led to a reconsideration of whether divestment remains the optimal strategy for shareholder value.
CEO Daniel Stone remains optimistic, citing anticipated sector tailwinds such as easing inflation, potential interest rate relief, and a mid-year childcare subsidy uplift that should support family affordability and participation.
Looking Ahead
Mayfield’s disciplined execution and operational improvements have positioned the company for a stronger second half of FY25. Despite occupancy still trailing last year’s levels, the company’s focus on sustainable earnings growth through cost control and enhanced service delivery signals a more resilient business model. Investors will be watching closely to see if these early gains translate into sustained performance improvements.
Bottom Line?
Mayfield’s turnaround momentum sets the stage for a critical test of sustained profitability and occupancy recovery in the months ahead.
Questions in the middle?
- Will occupancy levels continue to recover alongside profitability gains?
- How will the company resolve challenges within the Precious Cargo portfolio?
- What impact will contract renegotiations and cost savings have on long-term margins?