Nido's CEO and Director, Tom Herring, our CFO, Nadia Wilson-Ali, our Head of Education and Professional Development, and Mathew Edwards, our MD. We'd like to begin by acknowledging the Gadigal people of the Eora Nation, the traditional custodians of the land on which we present to you today. I pay my respects to elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander peoples with us today. To our shareholders, thank you for your continued support. Your investment in Nido enables us to deliver quality early education to thousands of children while supporting workforce participation and contributing to Australia's economic and social well-being. To our educators and service teams, thank you. Your resilience, professionalism, and unwavering focus on delivering quality education to children is changing their worlds and shaping their lives' trajectories. We're very proud to walk alongside you.
Our purpose is to create an environment that supports teachers to rise and make a positive impact on the lives of children. Everything we discuss today rests on the safety, protection, and development of children entrusted to us and on the professionalism of those who care for them. It's both a privilege and a profound responsibility to play a role in their lives, and we acknowledge the trust that families place in us. Today, I'll provide a brief summary for five minutes before deep-diving into some of the investments and changes we've made this year, our growth strategy, and perspectives on FY 2026 and beyond. Let me start with a brief summary of the year. In FY 2025, we grew top-line revenue and delivered EBITDA in line with our guidance. Our performance reflects both the resilience of our operating model and disciplined execution across the network.
The board has determined a final dividend of AUD 0.022, fully franked, representing 5.5% on the current share price and taking the full-year dividend to AUD 0.037 per share. The board's decision was supported by our balance sheet and cash flow outlook. Importantly, it doesn't constrain our ability to invest in growth or pursue acquisitions. We intend for dividends to remain a consistent feature of our capital management strategy, balanced appropriately with growth and our other balance sheet priorities. Throughout last year, we managed service level variable costs carefully and deployed capital selectively. As we signposted throughout the prior announcements, we made deliberate and decisive investments to strengthen the business. We strengthened our safeguarding, quality, and compliance capabilities. We evolved our offering to children and families, including our curriculum, our menus, and our resources.
We invested in our educators, including training and professional development, the Nido employee value proposition, and their experience. We evolved the Nido brand and our approach to marketing and family engagement. We advanced the design of our services and enhanced our approach to maintenance and cleaning. We invested in our leadership and governance and restructured to support quality, operational control, and growth. In FY 2025, we managed the opening of seven services in our incubator. We acquired three services out of incubation. So far in FY 2026, we've opened two additional services in the incubator already. We're expecting to open another 10 throughout the rest of the year. Our incubator pipeline currently includes approximately 100 services at various stages of maturity.
We're currently working through an acquisition of four services from incubation to settle in the first half of FY 2026 for approximately AUD 9 million. The year has started in line with budget, with January's EBITDA result an improvement on FY 2025. As we continue to work through February enrollment period, we're seeing some acceptable lead indicators, including inquiries are slightly above last year. Our enrollment offers to parents are up 20% year-to-date, year-on-year, and our conversion rates are improving and tracking above last year. Now these are early signs of improvement, and they're reflective of the way we pivoted in 2025 through some of the structural changes we've made and investment in capability and personnel. They're also partially supported by the subsidy changes with the introduction of the three-day guarantee for families. This has been a year of discipline and structural improvement.
We've ensured the foundations of the business are strengthened to continue to deliver safe and quality education. In FY 2026, we're focused on delivering a greater impact to the community through more days of learning, which is targeted to deliver growth in our underlying EBITDA in the order of 20% on the FY 2025 result. Highlighting our FY 2025 financial performance release to the market, revenue increased by 4% to AUD 173 million, delivering an AUD 17 million adjusted EBITDA and AUD 11 million adjusted net profit after tax, in line with that Q3 guidance. Cash conversion held strong at 94%, we ended the year with a net leverage ratio of 1.1x.
As mentioned, the board has determined a final fully franked dividend of AUD 0.022 per share, representing a 5.5% yield on our share price yesterday. This takes our full-year dividend to AUD 0.037 per share. Importantly, our educators delivered 938,000 days of learning and care. The personal, social, and economic impact that our educators make every day is profound, and we feel both the privilege and the responsibility of our work. We maintain quality ratings above the sector average, reflecting the quality, compliance, and seriousness with which we take our responsibility for quality, safety, and child protection. Through our incubator, we're able to open seven services and acquire three and maintain a strong forward pipeline.
Our FY 2025 service performance saw total revenue increase by 4% to AUD 166 million. Total service costs increased by 7% on the prior comparable period. This delivered service adjusted EBITDA of AUD 30 million pre-AASB16. Our average adjusted EBITDA per service was AUD 534,000. Our average daily fee was AUD 174, which increased from last year's AUD 164 average fee. We're able to deliver a wage to revenue ratio of 55% against 57% in the prior comparable period. Our revenue was underpinned by our average fees, reflecting the strong quality of our offering to the backdrop of lower days of learning. We actively manage variable costs and service level expenses to preserve margins through our operational discipline, whilst also investing in our services and our menu, consumables, and people.
In FY 2025, we made deliberate investments to strengthen the foundations of the business. We made discipline and purposeful change across six strategic pillars. I'd love to hand over to Nadia, our Head of Education and Professional Development, to take us through the first three of these pillars.
Thanks, Adam. Good morning. First, we strengthened our safeguarding, quality, and compliance capabilities. This year, the safety of children remains our primary focus. We strengthened safeguarding practices across people, policy, process, and digital systems. As we noted at the mid-year, Nido had already adopted most of the practices introduced throughout last year. Through the implemented changes, we maintained strong quality ratings and delivered a year-on-year improvement in compliance outcomes. These improvements build a good foundation for future enhancements. Second, we evolved our offering for children and families. This year marked an exciting milestone for us, launching Nido's Kindergarten Curriculum. Shaped by the voices of almost 1,000 children, families, educators, and community members over a 3-year period, it represents a shared vision of meaningful learning and growth.
By investing in this important stage, we are giving children the best possible start to education, paving the way for both a successful transition to school and life beyond. The development of our birth to three offering is underway, and we are working with a group of leaders to create a seamless continuum of learning alongside the kindergarten curriculum. We've invested in developing an outstanding menu created in partnership with the nutritionist after extensive consultation with our people, and which is dietician-approved. From varied proteins and flavors to allergy-friendly options, the menu is balanced, inclusive, and full of goodness, offering nutritious meals that children actually enjoy. Strong family partnerships are central to our philosophy. This year, we invested in family partnerships differently, hosting our first child protection webinar and extending our duty of care beyond the walls of our centers and into children's homes and communities.
Families were equipped with practical knowledge, shared language, and confidence to recognize, prevent, and respond to risks. This is important because child safety is not a program. It is an ecosystem of shared responsibility. When educators and families are aligned, informed by the same evidence, grounded in the same expectations, and united in the same resolve, children are safer. Protecting children is not something we do occasionally or reactively. It is who we are every day. We will host future forums to strengthen trust, deepen transparency, and reinforce our commitment to being a sector leader in child protection. Third, we invested in our educators and their experience. This year, we made substantial improvements in our educator recruitment, onboarding, development, recognition, and experience. As a result, we have materially improved educator retention across Nido. Over the last year, we have halved our attrition rate.
Reduced turnover strengthens relationships with families, improves educational consistency, enhances child safety through continuity of care, and reduces recruitment costs. Our teams have collectively completed more than 60,000 training courses, including on our mandatory policies. Many attended our face-to-face forums, roadshows, and communities of practice to support their development. We look forward to continuing this engagement in the coming year while incorporating the upcoming mandatory child safety training into our learning and development pathway. I'll now hand back to Adam to take us through the final three pillars.
Thanks, Nadia. Throughout FY 2025, we refined our brand and positioning. We listened to families and educators to better understand what differentiates Nido and align the organization around our belief that every day matters. To that end, we strengthened our marketing, inquiry management, and family support approach to improve enrollment outcomes and the overall family experience, including enhancements across digital, social, and also local area marketing channels. This sharper focus helped us navigate challenging trading conditions by concentrating on what we can control: engagement, enrollment, and experience. Being guided by our purpose and the belief that every day matters is a really authentic way to progress our engagement with children and families into the future. We've evolved our service design and facilities management, continuing to improve the physical environments that support learning outcomes and educate child and family experience.
We have the privilege of designing, opening, and managing wonderful purpose-built environments that have education and safeguarding at the heart of design. We've involved these designs and our designs based on the experience of our educators with learnings from global practices that we've observed and also the needs of our core service offering. Our environments are designed to protect, inspire, and support children every day. This is very important because the Reggio Emilia Philosophy considers the environment as the third teacher. Every single detail in the space, the colors, the layout, the furniture, the flow, it isn't just background. It actively shapes how children feel and how they learn. We've also invested in our leadership and governance and restructured to support quality, operational control, and also growth. Nido has a very unique leadership model at each center.
We have an Executive Service Manager that leads daily operations with vision and purpose. We have a Curriculum Leader that guides curriculum implementation, coaches and mentors educators, and fosters collaboration between families and the team, and a Family Advocate who advocates for the children and families, and also supporting the engagement and administration of families. These three roles work very closely with our lead educators, our cooks, educators, and the broader support team. This year, we strengthened senior leadership, governance, and key support office capabilities. We realigned our structure to enhance operational control and enable scalable growth. We moved to a more specialist leadership model. Dedicated leaders now focus on new service openings and maturing of practices, which drives continuous improvement and deeper expertise. We further strengthened area management capability by separating accountability for quality and people from operational performance.
This provides more targeted service-level support aligned to individual center needs. We invested meaningfully in data, analytics, and digital capability to improve decision-making, governance, and assurance. That positions us very well for the increased regulatory reporting requirements that are coming. Collectively, these changes are contributing to measurable improvements in quality, compliance, and operating performance. I now invite Tom Herring, our CFO, to present the financial results.
Thanks, Adam, good morning, everyone. I'll now talk through the highlights of group financial performance, dividends, and capital management. Please note that the figures presented here are on a pre-AASB 16 basis and exclude acquisition stamp duty. A reconciliation to the statutory results is in the appendices. Group revenue was AUD 173 million, including AUD 6.7 million generated from opening and managing services. Group EBITDA of AUD 17 million comprised EBITDA of AUD 30 million and net support office costs of AUD 30 million. Service EBITDA was at an 18% margin and averaged around AUD 530,000 per service. Net support office costs as a percentage of revenue was around 8%. This is slightly higher than last year, we are satisfied that the cost base is appropriate to deliver on our objectives in current conditions.
Depreciation of AUD 1 million reflects the low capital expenditure associated with Nido's portfolio of new fit for purpose learning environments. Financing costs were also low at AUD 600,000 as a result of debt levels and interest income on loans issued to our incubator. NPAT of AUD 11 million was below last year as a result of EBITDA and a full year of tax payments. The dividend announced today brings the total dividend for the year up to AUD 0.037 per share. Pleasingly, we're able to continue paying a dividend without compromising our ability to acquire mature quality services from our expanding pipeline of incubation. Since we last spoke, we've increased our acquisition capacity by establishing the AUD 30 million accordion in December, which leaves us with AUD 27 million of headroom and net leverage of 1.1x.
We expect to further increase our acquisition headroom and extend the maturity date of the facility later this year. In summary, our strong balance sheet, the performance of our business, and the opportunity to acquire from the incubator sets us up well to grow shareholder returns over the short, medium, and long term.
Thanks, Tom. We'd like to provide you with an overview of our platform for growth and our incubation model. At Nido, we grow differently to many in the rest of the sector. We've got the privilege of opening quality, purpose-built greenfield services that are designed to deliver safety, child protection, educational and social outcomes, and staff experience. Instead of taking on all the upfront risk of building new centers, we use what we call our incubation growth model. Private funds are investing approximately AUD 600 million of capital to build new centers. Nido designs, manages, and sets them up for success. Along the way, we earn establishment and management fees during this period, and importantly, we do not assume the financial risk associated with development or early-stage operating losses. This includes approximately AUD 150 million the incubator is expected to invest over the five-year period.
Once the center proves itself, reaching strong occupancy and earning targets, Nido has the option and the right to buy the service at a set multiple. By then, the center is already operating well with a culture and standards shaped by us from day one. It's capital efficient. We grow without stretching our balance sheet. It's low risk. We acquire once performance is proven. Ensures quality 'cause we've been in the driver's seat from design right through to operation. It gives us a predictable pipeline of new services ready to come into the group at a predictable acquisition multiple. This year, we've opened seven new services and two in the last two months. These include new services in Safety Bay in WA and Long Gully in Victoria. We've got an image of some of those centers up on the slides.
Importantly, in line with our purpose, our educators' experience, their wellbeing, and their feedback is taken into account to support them to deliver upon their aspiration for children and each other. Pleasingly, in FY 2025, we're able to acquire three services from the incubator that traded up well and hit the acquisition metrics. Incubation growth model has allowed us to increase our owned and incubated portfolio by 25% from IPO in October 2023 to 77 services today. We look forward with engaging with the market over the coming year regarding further openings and acquisitions. As mentioned in the last year, we've further strengthened our approach to opening new services and supporting their trade up, and this includes our designs, our marketing, our management and oversight, and also our quality and compliance capabilities.
Opening services for us at Nido is not about footprint expansion alone, it's about scaling and expanding quality and care. Our current pipeline of services continues to mature with over 100 sites at various stages of development. On top of the 17 currently in incubation, we expect to open approximately 19 sites over the coming six months. Each year, service reflects careful demographic analysis, disciplined capital allocation, and working closely with our incubator partners. We remain discerning and uncompromising on selection. We will grow where demographics support sustainable demand, there are unmet children and family needs, supply considerations are rational, safety and quality can be maintained, returns justify capital deployment. We are pleased with the progress of the incubator and look forward to communicating with the market as we continue.
As you can see up there on the slides, there were 18 services that were opened this year in incubation. Looking ahead to next year, despite occupancy being down in the month of January financial results are slightly ahead of last year. As we continue to work through the February enrollment period, we're seeing some acceptable lead indicators, including inquiries are slightly above last year, enrollment offers to parents are up 20% year to date, and conversion rates are improving and tracking above last year. Whilst we acknowledge that the challenging trading conditions will persist in the short term, we can see tailwinds coming through the three-day guarantee, the government's cost of living initiatives, and a continued strong employment market.
Going forward, of course, we look forward to seeing the birth rates tracking up in line with government forecasts, increasing the cohort of children aged zero to five through the system. Government policy is also shifting. The Australian Prime Minister, the Minister for Education, Minister Clare, and the Minister for Early Education, Minister Walsh, have all signaled a commitment to significant reform aimed at improving access, affordability, and quality in early education and care. They've publicly defined this reform as part of their legacy and have articulated a medium-term commitment toward universal access to early education and care. In January this year, the government increased childcare subsidies for some families. They replaced the previous activity test with a three-day guarantee, providing more affordable childcare for a segment of the community.
Whilst it's still early days, early indications show that it's encouraging some families to participate in childcare who have not done this before. All this reflects the growing recognition that early education is both social infrastructure and also economic infrastructure. It supports both workforce participation and provides a great start for children. As the reform evolves, several themes are very clear from government. Greater access and affordability, increased accountability, ongoing focus on workforce capability and funding model refinement. At Nido, we approach policy reform pragmatically and know that universal access, if implemented carefully, will broaden participation. We draw confidence from two sources, the Productivity Commission's modeling and also international examples, including Canada, that have introduced broad reforms in access, affordability, and funding. Expanding access without protecting safety and quality would undermine the objective of reform.
Whilst we await government certainty on reform, our strategy does not depend on a single funding configuration. It depends on quality education and care for children, child safety and protection, operational consistency, workforce stability and capability, capital discipline, and quality execution. Government policy may evolve, but our standards here at Nido will remain very high. Nido's focus going forward will continue to be evolving our quality, pursuing growth responsibly, and continued disciplined execution of our plan. In addition to continuing our incubator model as planned, we're currently exploring acquisition opportunities outside of the incubator as we've observed reduced multiples in the absence of buyers across the market. These market conditions are likely temporary and will exist for the next few years, and we're looking to take advantage of that for the benefit of shareholders.
Our expectation, given all of this, is to deliver in the order of 20% EBITDA growth year-on-year in FY 2026. We're gonna continue to focus on enrollments and manage service level variable costs. We'll continue to target growth through opening and acquiring services. We'd like to thank you very, very much for listening today. What we're now gonna do is hand out to some questions. Please drop them in the chat. We already have a few questions that you'll be able to see online there. The first question's about another provider. Thank you very much for that question. However, we're not in a position to comment on other providers and their performance. I'll read out question number 2, which was, "Could Nido Education face a goodwill impairment risk? If yes, what are the key drivers?
For example, occupancy, wage inflation, regulatory compliance costs, discount rates, acquisition multiples, et cetera. Thanks very much for that question. Like all acquisitive operators, Nido carries goodwill on its balance sheet. Each year we formally test for impairment and our auditors independently review and test those assumptions, and we continue to undertake rigorous annual impairment testing in current years. We have performed our annual impairment testing by comparing the carrying value of our assets, including the AUD 132 million of goodwill generated from acquisitions, both made at acquisition and since, both at IPO, sorry, and also since IPO, against our discounted cash flow projections. The testing indicates substantial headroom, and this has been independently audited by KPMG as part of our year-end process. Impairment would only arise if there was a structural deterioration in long-term cash flow assumptions.
Hopefully that answers your question, and thank you for that. Question 3: Why are new centers still opening if there are fewer children? Is this being driven by demographics, supply gaps in specific suburbs or policy incentives? Thank you very much for that question. Our sector, early learning, is highly centralized. Families make decisions based on convenience, often on the proximity of a service to their home, their daily commutes or their work. As a result, demand varies quite dramatically suburb to suburb. From our analysis and the analysis of others, some markets are clearly underserved while others are well-supplied. Our new services at Nido are typically developed in growth corridors or areas of population densification, suburbs with historically limited supply or families with unmet needs.
As outlined in our presentation, we follow a very structured and selective approach to analyzing the market and making decisions about where we should open services. Generally speaking, there are demographic markets where supply appears to have outpaced demand. If an operator has older services, they're more likely to be exposed to that new entrance risk, and as you appreciate, Nido services are all purpose-built and relatively new. I've got little doubt that over the next few years, over the coming years, capital will increasingly flow to better informed developers who will target specific micro markets rather than relying on national birth rate averages and birth rate data. While the headline birth rates may have been softer for the last couple of years, demand in targeted catchments certainly remains strong from our analysis. I thank you for that question.
The next question is, question four, which is: Is the government building more public childcare centers, and could that become a meaningful competitive threat to Nido over the next few years? The Commonwealth has certainly committed funding to expand capacity, particularly in underserved regions. More broadly, the Australian system remains, as you all know, predominantly market-based, with hundreds of millions of dollars of private funding invested to build capacity, including the money that I've talked about that's being invested from Nido and out of the incubator at the moment. Government-backed expansion is currently targeted at childcare deserts and underserved areas far more than wholesale competition with providers in the market. In addition, some markets, such as Western Australia, are considering trials with government-funded childcare delivered within school settings.
Those models, particularly the government-funded childcare delivered within school settings are structurally different from long daycare. They often involve different operating hours, different service design, different educational approach, and integration into school environments. While these offerings may meet the needs of some families, and I have no doubt that they absolutely do, they're not a direct substitute for Nido's long daycare educational model. Our strategy remains on high quality, occupancy strengths, parent experience and discipline site selection. Thank you for that question. Another couple of questions that are coming in. Okay. Oh, this question here: You are not disclosing occupancy ratios. Thank you for that question. Last year, across Nido-owned services, we've delivered, as I've mentioned in the presentation, 953,000 days of learning. That's a really tangible impact for children and families.
That's a key measure for our teams as well with our internal scorecard. As has been the case, we don't provide specific occupancy forecasts. What we can say is that our forecast is on continued improvement across the portfolio and trade up of our new services, and we're very focused on the lead indicators inside Nido. That's the inquiries, the offers, the enrollments, retention and advocacy of families. Not all occupancy is the same, and it would be misleading for us to give you an occupancy number without looking at the other factors or looking at the quality of, say, or the makeup of that occupancy.
As a measure itself, occupancy can only properly be understood alongside other factors such as fees and service mix, age enrollments of mix and the maturity profile of centers, including those that are currently in trade up. What is important is that our financial performance remains strong. We've delivered an average adjusted EBITDA of AUD 534,000 per service. That really demonstrates the resilience of our business model and our ability to deliver both social and financial returns. We've got another couple of questions here. I think we've got time for a couple more. The first question there is: You mentioned the January occupancy down but profit up. Can you say whether profitability per service has improved? Thank you very much for that question. That is right.
Year to date, we've seen a couple of performance drivers play out. Firstly, occupancy has started slightly down as we've let the market know. Secondly, it's also true that, year on year, our EBITDA has improved, year on year, which is something that we're quite happy with. A lot of our leading indicators have also kicked up as I've mentioned, around inquiries and offers and some of those, and some of those conversions. The specific question here about how, on, s orry, if you can just see the question for a second. I think it was on center profitability has improved. Yes, I can say that center profitability has improved year on year to date. Thank you for that question.
There's a question in here about occupancy. "Are you able to please comment on current occupancy and how that compares to the prior year?" I've already covered that, just generally speaking, how that, you know, years of the days of learning that we've delivered this year, the days of learning that we've delivered year to date, and compared that to the prior comparable period. I think I might have covered off the answer to that, hopefully. The next is, "Thanks for the presentation. Noted an increase in borrowings in excess of AUD 20 million, presumably for the acquisition of new centers. What would be the impact on the P&L net of increased interest expense, and acquired new center profitability?
Yeah. I'll take this one, Adam. Thanks, Tony, for the question. It's fair to say that interest costs will increase as we draw down on the acquisition facility to make acquisitions and continue our growth strategy. We won't give specific details, but we're very comfortable with the strength of our balance sheet. Our multiple of 4.5x EBIT is a 22.2% ROI. Less interest returns us in the order of around 16%-17%.
There's another question here about supply growth. "Are you seeing any indications that supply growth is easing?" Our sector obviously takes time to take a service out of an idea, ideation, identifying a particular site through development and then through opening. The number of sites that are opened are a lag indicator. What we have seen through the last few years through our sector data in particular, which is a great source of information if investors would like to check that out. It shows the year on year increases in supply or changes in net supply, so the number of services that are open and the number of services that are closing.
What we've seen over the last few years that there has been more supply put into the system. Q4 last year from our early reading of that information shows a slight dip, we've seen already year to date, January, there have been quite a few services opened. That's what we're seeing there. Anecdotally, we're understanding that the developers in particular are being more discerning around where they're seeing new services and where the opportunities are for development. "Can you give an early indication of how many families took up the free month of childcare promotion?" We've run a number of different promotions as we do from time to time.
We had one in February that'll encourage families to join the Nest, and we're really excited about that. At this stage, we haven't done a formal evaluation of that program, and it's still running during February. Thanks very much for that question. Just checking if there are any more questions. I appreciate we've gone over time by 5 minutes. Okay, no worries. We will draw the Q&A to close now. I just wanted to thank everybody for listening today. We're realistic about the conditions in which we've been operating and equally clear about the position that we have built for growth. In a changing and evolving environment, the business has demonstrated a resilience. We've strengthened our foundation, we've sharpened our operating discipline, and we've invested deliberately in quality, capability and long-term growth.
We move into this next period and this next year, our priorities remain absolutely unchanged: disciplined execution, consistent performance, and sustainable value creation. On behalf of the board and leadership team, I wanna thank our educators and teams for their professionalism and commitment, our families for the trust they place in us every day, and our investors for their continued support. If you do have any further questions or if any other further questions do drop into the chat through the day, we will answer them and come back to you. Please also don't hesitate to reach out to us if you've got any questions. We look forward to updating you on the progress throughout the year. Thanks very much.