G8 Educations posts 53 per cent profit increase after lifting fees and shareholder dividends
Australia’s largest childcare provider made an extra $100m out of parents and carers in the past year, despite having fewer children enrolled in their 430 centres. Here’s how
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Australia’s largest childcare provider, G8 Education, has posted a 53 per cent profit increase despite stagnant occupancy, landing its new CEO a $3m pay packet and shareholders a $28.3m dividend windfall.
Gold Coast-based G8, with 430 centres across brands including Kool Kids, Creative Garden and Community Kids, logged a $56.1m net profit the 2023 calendar year.
Revenue from customers grew by almost $100m – up nine per cent on 2022 – despite occupancy dropping slightly.
In its statement to the market, G8 said it had negated the impact of sluggish occupancy, high inflation and wage costs through “a diligent focus on cost management”.
The group hiked fees by 4.5 per cent over the 12 months to December.
Shareholders received dividends of 4.5c for the year, with the company paying out $28.3m to its members.
Managing director and CEO Pejman Okhovat said the company’s focus on staff retention and offloading unwanted centres had improved its year-on-year performance.
“Our team’s effort in 2023 saw G8 Education continue to improve its financial performance by focusing on improving experiences for its families and employees, while maintaining a disciplined approach to running our business, optimising our network, and carefully managing costs and our balance sheet,” he said in a statement
“Improving occupancy remains a core focus with our largest states performing in line or above CY22 with further opportunities available in our smaller states.”
The year saw the introduction of the Federal Government’s $4.7bn which increased the Child Care Subsidy rate in a bid to make services more affordable.
Despite those intentions, the Australian Competition and Consumer Commission has found it had “limited influence on reducing childcare fees”, as providers set their prices based on what parents were willing or able to pay.
In its final report from its inquiry into the childcare sector, the commission found fees across all childcare services had “grown faster than inflation and wages” since the subsidy was introduced and that lower costs were “quickly eroded” by providers hiking fees.
Among eight recommendations to the Government was a call to “monitor providers’ prices, costs, profits and outcomes, supported by a credible threat of regulatory intervention to place downward pressure on fees”.
Mr Okhovat, previously head of retail giant Big W, was paid $2.295m for his first year in the job.
He was also awarded a raft of valuable equity packages to make up for incentives he would likely have received from his previous employer and other performance rights which took his 2023 remuneration total to $3.05m.
G8 employs more than 10,000 people across its centres in Melbourne, Sydney and the Gold Coast.
The company revealed it had given $38.7m back to staff it underpaid, but that $5m of the underpayments were still outstanding as it could not locate the people entitled to it.
G8 also flagged an ongoing class action via Slater and Gordon on behalf of shareholders which claim it breached continuous disclosure obligations in 2017 and 2018.
The case is set for trial in the Supreme Court of Victoria starting April 15.
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