Gold Coast listed childcare company G8 Education loses $118m in value on day of AGM

ALMOST $118 million was wiped from the value of a Gold Coast-company today as the group continues to grapple with a major challenge.

The stock has plunged 37 per cent in the past year.

ALMOST $118 million was wiped from the value of Gold Coast-based G8 Education as the group continues to struggle with an oversupply of childcare places.

Shares in G8 Education slumped were down 7.2 per cent or 18¢ to $2.31 yesterday after hitting a 52-week low of $2.23 earlier in the day. The stock has plunged almost 37 per cent over the past year.

Shareholders punished the company on the day of its annual general meeting, where chairman Mark Johnson and managing director Gary Carroll blamed challenging industry conditions for poor occupancy, revenue and profits.

Childcare supply growth out-paced demand by 2.5 per cent. Pic: Adam Head

The share rout follows another in December, when $458 million was sliced from the market capitalisation after G8 cut its earnings forecast.

Since October, when shares were trading at $4.71, G8’s value has been slashed by $1.1 billion.

Mr Carroll said the company’s previous earnings per share target of 40¢ per share by December 31, 2019 was “no longer achievable”.

Gary Carroll. Photo: Steve Holland

The company will provide a more specific three-year EPS target when it releases its half-year results in August.

Mr Johnson told shareholders record high supply had impacted occupancy, but changes in Federal rebates to families provided hope of improvement.

Despite the challenges, the group reported pre-tax earnings of $156 million and net profit $81 million, delivering franked dividends totalling $77 million.

“The new Government funding package is also expected to drive demand in the sector from July 2018, with the demand/supply environment to be much more in balance in 2019,” Mr Johnson said.

“With the investments that have been made over the last two years, we feel strongly that we are positioned well to take advantage of any opportunities that may arise while maintaining our high levels of service provision to Australia’s communities.

“Recent share price performance has been disappointing. While not something the board and management team can control, the attitude to the sector underplays, in our view, the positive medium and longer-term industry fundamentals and the investments we have made to position well to capitalise on better times.”