G8 Education (ASX: GEM) shares are currently down around 1% after holding its annual general meeting.
What is G8 Education?
G8 Education is the largest ASX listed childcare provider. At the end of 2018, G8 had more than 500 childcare centres in Australia, as well as a few in Singapore. G8 Education has used an acquisition strategy to grow the number of brands it operates including Buggles, The Learning Sanctuary, Kool Kids, Bambinos and Creative Garden.
What did G8 Education say?
The G8 leadership reminded investors that COVID-19 had a rough impact on attendance. By late March attendance was approximately half of that of previous years. Thankfully the government stepped in with some important funding. The company also raised $301 million to ensure it had enough liquidity and financial flexibility.
G8 Education has also delayed the payment of its dividend, delayed projects and reduced costs where it can, including the remuneration of the board and leadership team.
At the moment G8’s booked occupancy is around 65% with physical attendance of around 53% as some parents are deciding to keep their children at home despite having a booking at a centre.
Booked occupancy is expected to be impacted by various factors, including the reintroduction of parent co-payments under the CCS arrangements which recommence from 13 July, parents returning to work and unemployment rates.
G8 said it can’t comment yet on the net effect of these factors on booked occupancy, though attendance is expected to be more in line with booked occupancy.
The company re-iterated it expects to recognise an impairment charge in its 2020 half-year result of between $230 million to $250 million.
I’m not sure if G8 Education is a buy, even at this low price. I’m wary of any industry that is quite reliant on government support, as that support could be withdrawn. I’d rather buy a growth share like Bubs (ASX: BUB).
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
