Gold Coast childcare group G8 Education unveils massive impairment costs from COVID19 impact

Gold Coast-based childcare giant G8 Education has flagged a major hit to its half-year results due to the impact of COVID19.

G8 EDUCATION investors are set to take a hit after the company said it expects to recognise a non-cash impairment in the range of $230 million to $250 million, reflecting the impact COVID-19 has had on its childcare business.

G8, which operates 475 childcare centres in Australia and 17 in Singapore, says the pandemic has exacerbated what it described as a “challenging industry supply environment that has been in place for the past 12-24 months”.

The impairment charge in its half-year accounts relates to the carrying value of both goodwill and a number of underperperforming centres, G8 said.

It will have no impact on the company’s debt facilities or compliance with banking covenants, and will give G8 more flexibility with how it manages those underperforming assets, the company said.

G8 Education managing director Gary Carroll. Photo: Scott Powick

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Investors punished the stock sending it down 8.5 per cent to 96.5 cents.

The impairment news comes after the company earlier this week said it would be in ‘no worse position’ due to the Government’s revised childcare package.

The Government on Monday announced that payments under its relief package for the sector would cease from July 12 and that pre-pandemic arrangements, such as the child care subsidy, would resume from that date. Parents, who have been receiving ‘free childcare’, will need to start making co-payments from that date.

Under the Government’s revised support package, G8 centres will be receiving a “transition payment” equal to 25 per cent of each centre’s fee levels prior to the coronavirus pandemic.

This is half the amount received under the previous package.

The company said this would leave it financially in “no worse a position relative to the prior support measures even at more subdued occupancy levels”.

Occupancy is currently at about 65 per cent for its centres, however physical attendance is just 52 per cent.

G8 is due to hold its AGM on June 17.