G8 Education returns to profitability but lockdowns threaten to undercut that success

A Gold Coast-based childcare giant has returned to profitability but lockdowns on the east coast threaten to undermine its operations over the rest of the year.

Lockdowns and working from home trends threaten G8 Education’s recovery.

One of Australia’s biggest childcare and early education groups has returned to the black after a horror 2020.

But will the Covid delta strain running rampant down south, along with a significant number of people still working from home, put a fresh dent in the profitability of Gold Coast-based G8 Education?

The group reported a $25.1m net profit on Monday for the half-year to June 30 based on revenue of $421.5m.

That was a bounce back from the huge $244.1m loss delivered in the same six-month period last year, as well as the $187m of red ink for all of calendar year 2020.

Gary Carroll, CEO of G8 Education

Investors were not impressed, however, sending the share price down nearly 6 per cent to close at 99 cents.

Boss Gary Carroll (illustrated) warned that occupancy rates, now just shy of 70 per cent at the company’s more than 450 centres nationwide, have begun to come under pressure again over the past couple of months.

“After an encouraging first half, since June we have started to see some impact of Covid-19 lockdowns on occupancy in the eastern states,’’ said Carroll, who pocketed just over $750,000 last year even after a 20 per cent salary cut for executives.

“We have the right settings and systems in place and are well-capitalised to weather this period and emerge in a strong position.’’

Yet something was clearly missing when G8 underpaid staff, a non-pandemic-related stuff-up first revealed in December and which has undercut the profit result.

The company acknowledged Monday that it has an $80m provision to cover remediation payments to about 27,000 current and former staff based on errors which first emerged in 2014.

G8, which raised $301m in fresh capital last year and received $102m in JobKeeper payments, also has to throw money at lawyers to defend a class-action lawsuit.

Slater & Gordon, which lodged the claim last year on behalf of investors who bought shares between May 2017 and February 2018, alleges the company failed to disclose key information related to its financial performance.

Not surprisingly, G8 once again decided against handing out dividends. But it held out hope that the payments can resume next year.

In a bid to help the ailing sector, the federal government announced a $1.7bn investment to expand the nation’s childcare workforce as part of its May budget.

About 250,000 families, with more than one child under the age of five in childcare, will have 95 per cent of their out-of-pocket expenses for second and subsequent children paid for out of the public purse under the new scheme set to start next year.

Craig Gore

MORE GRIEF FOR GORE

More grief awaits jailed former rich-lister Craig Gore.

The disgraced ex-Gold Coast developer is still facing three charges of managing corporations while banned.

The matter returns to Brisbane Magistrates Court in mid-October, with Gore staring at penalties of up to a year in prison or an $8500 fine per charge if convicted. He has not yet entered a plea.

The further hearing comes after the twice-bankrupt Gore lost an appeal last month against his fraud conviction.

He was found guilty late last year of defrauding nearly $350,000 from self-managed super fund investors in 2013 and 2014.

Gore was sentenced to five years imprisonment but it’s to be suspended in late 2022.