This article is from the Australian Property Journal archive
LISTED childcare provider G8 Education has suffered a statutory loss of $239 million after taking an impairment charge of $237 million, and the group is winding back its overseas expansion to focus on Australia and ensure the business emerges strongly post COVID-19.
Underlying EBIT fell 44% to $29 million for the year to June 30 and revenue was $308 million down 28% on FY19, driven by the capped revenue model under the federal government’s ‘free’ childcare package, in place between 6 April to 12 July.
CEO Gary Carroll said whilst G8 had a strong start to 2020, the impact of COVID-19 on the economy and the sector have been significant.
“Our revenue during the first half was impacted by the initial government support package which capped revenue for providers, irrespective of occupancy figures. Following the immediate hit to occupancy at the start of the pandemic, we saw occupancy levels increase during the period of government-supported free childcare. With the exception of Victoria, occupancy has continued to grow steadily, even after the re-introduction of the Child Care Subsidy in mid-July.
“The government’s support measures have played an important role in ensuring the viability of the broader sector and demonstrate the mechanisms in place to quickly respond to COVID-19 lockdowns, as we have seen in Victoria. It also reinforces the growing recognition of the significance of the sector to the economy and our children’s futures,” Carroll said.
“Although it is impossible to predict the duration and ongoing impact of COVID-19, the measures we have taken ensure the group is well-positioned to be agile and responsive during this current period, and the recovery period that will follow,” he added.
Carroll said the initial impact of COVID-19, which saw families withdrawing their children from care resulted in occupancy and attendance levels hitting a low in April. Those levels recovered as initial COVID-19 cases were managed and as a result of the government’s initial ‘free’ childcare support package.
The group’s current occupancy is 69% with attended occupancy of 50% with COVID-19 impacts varying by region and state at various times.
Meanwhile following a strategic portfolio review, G8 is divesting its Singapore business, which is expected to complete in the second half of the year.
Carroll said this will enable G8 to focus its attention on maximising the quality and performance of its Australian portfolio, including ensuring the business emerges strongly from the current COVID-19 operating environment.
“COVID-19 impacted trading conditions are expected to continue and given this backdrop the group will continue its disciplined approach to cost and cash management. The Acceleration Program has continued despite COVID-19, focusing on consistent high-quality education programs and family experience.
“Government funding mechanisms are in place until the end of September, with a track record of swiftly responding to COVID-19 driven lockdowns. The national footprint of G8’s centres provides a degree of portfolio diversification protection, with COVID-19 impacts varying by region/state,”
He said the removal of JobKeeper and government stimulus is expected to impact unemployment levels, as well as impact bookings moving forward.
“While current occupancy levels of 69% are solid, given the ongoing uncertainty and market volatility, G8 is not in a position to provide guidance on expected occupancy or financial operating performance.” Carroll concluded.
