Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

G8 Education (ASX:GEM) share price tracking above consensus despite difficult trading conditions

Childcare operator G8 Education Ltd (ASX: GEM) share price has finished in the red today after the company provided a trading update. 

The childcare operator G8 Education Ltd (ASX: GEM) share price is up 1.10% after the company provided a trading update.

GEM share price

Source: Rask Media GEM 2-year share price
Source: Rask Media GEM 2-year share price

Pandemic continues to impact occupancy

Recent trading has favoured G8 as New South Wales and Victoria emerge from extended lockdowns.

Subsequently, core occupancy is at 76.5%, marginally above 2020 but still 2.1% below 2019.

Source: G8 Education trading update
Source: G8 Education trading update

Regional areas continue to perform better than their urban counterparts.

To illustrate, CBD locations are down 29.6% compared to pre-pandemic levels whereas rural centres have had a 3.1% increase.

From a geographic perspective, the ACT is the most underwhelming state, with occupancy 23.4% below 2019.

Conversely, Western Australia is the strongest performing state with an 8.9% increase over 2019.

Scomo to the rescue

Over the past five months, G8 has had 119 centre closures for an average of 7 days per closure. 

Each day a centre is closed, it costs the business approximately $3,300. Therefore, G8 has lost about $2.7 million of revenue.

To offset the lost revenue, the government has supported the sector via fee waivers and additional absence days.

Financial update

For the 11 months of CY21, the company has achieved operating earnings before interest and tax (EBIT explained) of $76 million and net profit after tax (NPAT) of $43 million.

Both figures remain ahead of market expectations.

G8 education runs on a 1 January to 31 December financial year, commonly known as a calendar year.

The company’s debt position remains strong, with $17 million in net debt after wage remediation payments of $38 million.

The business also reported Software-as-a-Service costs that have previously been capitalised will be treated as an expense rather than an asset.

This dampens future profit results but will have no net effect on cash flow.

Dividends are expected to resume this year with the first to be paid next year.

Operational update

The Improvement Plan (IP) has rolled out across 223 centres with a further 138 recently added to the program.

The business has 16 greenfield locations reaching the occupancy hurdle of 80%, with the portfolio recording EBIT of $1.7 million.

Six of these centres will be transferred to the core centre portfolio.

The business opened just 1 new centre in CY21. Positively, it expects to open 13 new centres in CY22.

Initially, these 13 centres will drag EBIT down by $5.5 million, however, it will become more profitable as occupancy increases.

If you enjoyed this update, consider signing up for a free Rask account and accessing our full stock reports.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Lachlan does not have a financial or commercial interest in any of the companies or funds mentioned.
Skip to content