Shares rise after Gold Coast childcare giant G8 Education raises $227M from investors

Shares in Gold Coast-based childcare giant G8 Education are trading slightly up in the first session since raising $227 million from investors.

SHARES in Gold Coast-based childcare giant G8 Education are trading slightly up in the first session since raising $227 million from investors to support the operation of its 475 centres.

The company announced this morning it had completed the institutional placement and entitlement offer at 80c per share with 99.7 per cent of investors taking part raising $227 million.

G8 will issue 278 million new shares, which will rank equally with existing shares.

The Gary Carroll-led company announced the capital raising on Thursday to raise $301 million in total, including a retail offer, to provide liquidity and support the operation of its 475 centres throughout Australia.

G8 Education managing director Gary Carroll. Photo: Scott Powick

That retail offer opens on April 20 and is expected to raise a further $74 million.

Mr Carroll said he was pleased by the strong support from investors.

“The cash preservation and capital measures we have announced, including the equity raising, provide G8 with additional liquidity and financial flexibility to navigate this current period of market disruption,” he said.

In early trade shares were up slightly at $1.085.

Julie Madgwick – Head of Early Learning and Education at G8 Education – at Community Kids Broadbeach Waters. Picture Glenn Hampson

G8 will issue 377 million new shares in total (retail and institutional) representing 82 per cent of existing securities at 80 cents per share meaning it is heavily dilutionary to existing shareholders. However, they can offset the impact through the entitlement offer.

Funds will be used to repay debt, shore up cash on hand and pay for transaction costs. The raising is expected to reduce leverage from 2.4 to 0.4 debt times pretax earnings. This results in net debt falling from $354 million to $65 million.

The G8 announcement comes after the Federal Government announced that it will from April 6 make weekly payments to providers in lieu of the Child Care Subsidy and the Additional Child Care Subsidy.

The payments represent 50 per cent of each centre’s fees received in the fortnight prior to March 2.

Payments will be made until June 28 with an extension to be considered after this period and are meant to complement the JobKeeper program.

G8 said it expected all full time, part-time, long-term casual and support office staff employed as of March 1 to be eligible for the program, under which $1500 payments are made per employee from the first week of May.

G8 previously announced it would delay a dividend payment due this month until October.