Gold Coast childcare giant G8 Education hit by class action from Slater and Gordon
Gold Coast childcare and early education giant G8 Education has been hit by a class action filed on behalf of aggrieved shareholders by Slater and Gordon.
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GOLD Coast childcare and early education giant G8 Education has been hit by a class action filed on behalf of aggrieved shareholders by Slater and Gordon.
The action alleges G8 breached sections of the Corporations Act by engaging in misleading or deceptive conduct and contravening its continuous disclosure obligations by failing to disclose to the market information relevant to its CY17 financial performance.
G8 on Monday issued a statement saying it has not received any correspondence related to the class action from Slater and Gordon.
“Any such proceedings, if served, will be vigorously defended,” the company said.
Slater and Gordon said the basis of the action were three announcements between May 23, 2017 and February 26, 2018.
The first on May 23, 2017 was an earnings forecast of underlying pretax earnings of “mid to high $170’s million” for 2017.
On December 4, 2017 G8 downgraded its forecast of underlying pretax earnings to “around $160 million”.
This caused the share price to plunge 23 per cent in single day.
On February 26 G8 released its full-year results for 2017 revealing underlying earnings of $156 million, $4 million less than the December announcement.
The share price again declined by 8 per cent following the results announcement.
Slater and Gordon said its action relates to any investors who bought G8 shares between May 23, 2017 and February 23, 2018.
It said the proceedings were issued on an “open class basis” meaning individuals who qualify but do not want to partipate are likely to be invited by rhe court during the course of the proceedings to opt out of the action.
Slater and Gordon is calling for interested parties to register their interest.
EARLIER: AUGUST 24
GOLD Coast-based childcare giant G8 Education has revealed it has received $160.1 million in Federal Government funding through the child care relief package and JobKeeper wage subsidy.
The Gary Carroll-led company, which has 150 staff at its head office in Varsity Lakes and about 475 centres in Australia, released its half-year results today. G8’s brand include Sand Castles and Kool Kids.
Mr Carroll said the impact of COVID had been significant with the company reporting underlying earnings had fallen by 44 per cent to $29 million and revenue was down 28 per cent to $308 million.
G8 said this was driven by the Federal Goverrnment capping revenue under its ‘free’ childcare package in place between April 6 and July 12.
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The company also revealed the extent of Government support under the initial relief package was $89.3 million.
It said it received $70.8 million in JobKeeper payments for the first half.
G8 said it expects to receive $51 million under the Government’s transitional support package which cuts the payments to 25 per cent of fees received prior to March.
Mr Carroll said the Federal Government had managed to find the right balance between affordability for families and helping the sector through subsidies.
“I think the real positive story in the results is firstly we overachieved against our cost savings and cash preservation targets,” he said.
“We are happy with how we are running the centres and protecting the health and wellbeing of our children and families.
“Lastly we have been pleased with how the government has responded with the initial relief package and with the amended relief package. I think they have got the balance right between affordability for families, viability for operators and taking account of lockdown situations to ensure the sector manages through the crisis very well.”
Mr Carroll said its staff in Victoria were coping well with new lockdown measures.
“They are good. We have been working closely with them to ensure we are complying with all the requirements around the number of people that can attend the centres and providing them with alternative work either at the centre or at home to ensure that they remain with the centre and productive,” he said.
Mr Carroll said the sale of its assets in Singapore - where it has 17 company-owned centres and 18 franchisees - was as a result of wanting to refocus its efforts on the Australia market.
“It is not at a scale of business we want and when we looked at the market and our centres we had a choice of needing to invest a lot of capital and probably changing our offer quite materially moving forward or exiting Singapore and reinvesting into Australia where there are better opportunities.”
EARLIER:
GOLD Coast-based childcare giant G8 Education has unveiled a $239 million first-half loss and flagged that it will exit its Singapore operations.
The Gary Caroll-led company, which operates child care centres under brands including Sandcastles and Jellybeans, this morning released its results for the six months to June 30.
Mr Carroll said the impact of COVID had been significant with the company reporting underlying earnings falling by 44 per cent to $29 million and revenue down 28 per cent to $308 million.
G8 said this was driven by the Federal Goverrnment capping revenue under its ‘free’ childcare package in place between April 6 and July 12.
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The statutory loss of $239 million was due to a non-cash impairment charge of $237 million, which G8 previously flagged in June.
In preliminary comments Morgans analyst Fiona Buchanan said it was a messy result due to the impact of COVID-19.
“Near term trading will likely to be impacted by COVID driven lockdowns and removal of Govt subsidies including JobKeeper,” she said.
“Following capital raising, bank support (including covenant relaxations) GEM can manage through ongoing downturn.”
G8 said occupancy is currently 69 per cent with actual attendance 50 per cent.
“Whilst G8 had a strong start to 2020, the impact of COVID-19 on the economy, the sector and our families has been significant,” Mr Carroll said.
“Our revenue during the first half was impacted by the initial Government support package which capped revenue for providers, irrespective of occupancy figures.
“Following the immediate hit to occupancy at the start of the pandemic, we saw occupancy levels increase during the period of Government-supported free childcare.
“With the exception of Victoria, occupancy has continued to grow steadily, even after the reintroduction of the Child Care Subsidy in mid-July.”
G8 received $89.3 million during the first half from the Government’s child care relief package.
That figure was expected to fall to $51 million in the second half under the transitional package.
The company said JobKeeper contributed $70.8 million in the first half and is forecasting that figure to be $14.1 million in the second half of the year.
G8 said it will sell off its Singapore business where it has 17 centres to focus on its Australian business with about 475 centres.
“This will enable G8 to focus its attention on maximising the quality and performance of its Australian portfolio, including ensuring the business emerges strongly from the current COVID-19 operating environment,” the company said in a statement.
G8 has suspended its dividend policy (a deferred final dividend for 2019 will be paid in October) and has not provided full-year guidance.
The company said it expects COVID to continue to impact trading conditions.
“A combination of the Group’s net debt position, lender support and covenant relaxations until December 2021, provides the Group with substantial financial flexibility to withstand a prolonged downturn,” it said.
“While current occupancy levels of 69% are solid, given the ongoing uncertainty and market volatility, G8 is not in a position to provide guidance on expected occupancy or financial operating performance.
“With the changes implemented over the past few months, G8 now has the people, balance sheet and processes in place to emerge from the COVID-19 environment as a stronger business.”
Originally published as Gold Coast childcare giant G8 Education hit by class action from Slater and Gordon
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