Gold Coast childcare company G8 Education reports profit dip and shares dive more than 13 per cent

A Gold Coast listed company lost more than $200 million in sharemarket value after it reported its full-year results this morning.

G8 Education has had a bad day. Photo: iStock

SHARES in Gold Coast listed childcare company G8 Education plunged more than 11 per cent, slashing more than $149 million off its value by the time the market closed.

G8’s net profit fell 14.5 per cent to $79.5 million in calendar 2018 despite revenue increasing 7.7 per cent to $858.2 million.

The company, which has a number of brands including Headstart Early Learning Centres and Pelican Childcare, reported earnings of $136.3 million for the year to December 31, in line with the company’s forecast, but lower than the previous year.

G8, which is the Gold Coast’s biggest listed company and Australia’s largest childcare operator, said its occupancy was down and that conditions in the sector remained challenging despite the growth of supply “moderating”.

Acquisitions contributed net earnings of $17.5 million, up 14 per cent year-on-year and, while incremental earnings from those made in the prior year were below expectations in the second half of last year, the company said improvement plans were showing positive early signs in 2019.

G8, which reports on a calendar year instead of financial year, said shareholders would receive an 8c dividend, to be paid in April.

Shares in G8, which closed on Friday at $3.63, opened yesterday at $3.45 and traded as low as $3.095 before recovering slightly to close 11.02 per cent down at $3.23.

G8 Education reported lower profit for 2018. Photo: iStock

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G8 managing director Gary Carroll said the group’s profit and cashflow results reflected “the disciplined management of the G8 portfolio in challenging market conditions”.

“Although average like-for-like CY18 occupancy was down 1.9 per cent to 74 per cent, occupancy growth built steadily through the year with like-for-like occupancy finishing the year above the prior corresponding period,” he said.

“While it is clearly still early days, it is encouraging to see this positive trend in occupancy continuing into CY19.

Gary Carroll of G8 Education. Photo: Steve Holland

“It was also pleasing to observe the improved performance of Queensland and Western Australia, both of which had lower supply growth rates, as well as the improved performance of New South Wales and Victoria in the second half.”

Mr Carroll said tighter cost controls from the second quarter of the year had resulted in a stronger wage performance in that quarter, with the fourth quarter wage efficiency outperforming the prior year.

“While acquisitions contributed net earnings of $17.5m, up 14 per cent year on year, the performance of prior year acquisitions was mixed and the results were below expectations in CY18 H2,” he said.

“Importantly, occupancy has continued to trend in the right direction and where necessary action plans that have been put in place are yielding positive early signs.”

Mr Carroll said the group continued to focus on a transformation to improve its results.

He said the current calendar year had been encouraging, with occupancy growth around 2 per cent above last year and wages performing in line with expectations and ahead of last year.