Nido’s Profit Decline Amid Rising Liabilities Raises Investor Questions
Nido Education Limited reported a 7.5% increase in revenue for the half-year ending June 2025, alongside a modest net profit and a fully franked interim dividend. The company also completed a strategic acquisition to expand its childcare footprint.
- Revenue rose 7.5% to $81.2 million
- Underlying EBITDA declined by 12.5%
- Net profit fell to $2.5 million
- Declared fully franked interim dividend of 1.5 cents per share
- Completed $2.3 million acquisition funded by debt
Revenue Growth Amid Profit Challenges
Nido Education Limited (ASX – NDO), a national operator of early childhood education services, announced its half-year financial results for the period ending 30 June 2025. The company reported a 7.5% increase in revenue to $81.2 million, reflecting steady demand in the Australian childcare sector. However, underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) declined by 12.5% to $6.6 million, while net profit after tax fell to $2.5 million, down from $3.4 million in the prior corresponding period.
Dividend Declaration and Capital Management
In a positive signal to shareholders, Nido declared a fully franked interim dividend of 1.5 cents per share, marking a return to dividend payments after none were declared in the prior half-year. The dividend will be paid on 16 September 2025, with a record date of 5 September. Notably, the company’s Dividend Reinvestment Plan will not apply to this interim dividend.
Strategic Acquisition and Growth Initiatives
Continuing its expansion strategy, Nido completed the acquisition of a childcare service owned by NAED Holdings Pty Ltd for $2.3 million in late July 2025. This acquisition was funded through the Group’s borrowing facility and aligns with Nido’s incubation model aimed at scaling its Nido Early School brand. The move underscores management’s commitment to growing its footprint and enhancing service quality.
Financial Position and Going Concern
The company reported current liabilities exceeding current assets by $23.6 million, primarily due to $21.6 million in lease liabilities. Despite this, management affirmed the Group’s going concern status, supported by positive operating cash flow of $5.5 million for the period and access to a $25 million corporate loan facility, with $21 million drawn as of June 30. The Group also holds a $30 million accordion facility, providing additional financial flexibility. These facilities mature in 2027, and the company remains compliant with all debt covenants.
Outlook and Market Context
While the decline in underlying EBITDA and net profit may raise questions about margin pressures or cost management, Nido’s revenue growth and acquisition activity suggest a focus on long-term scale and market presence. The upcoming investor conference call scheduled for 28 August 2025 will likely provide further insights into operational trends and strategic priorities. Investors will be watching closely how the company balances growth investments with profitability in a competitive childcare market.
Bottom Line?
Nido’s half-year results reveal growth ambitions tempered by profit pressures, setting the stage for scrutiny on its path to sustainable earnings.
Questions in the middle?
- What factors contributed to the decline in underlying EBITDA despite revenue growth?
- How will the recent acquisition integrate and impact future financial performance?
- What are management’s plans to address the current liabilities exceeding current assets?
