This article is from the Australian Property Journal archive
CONCERNS around oversupply and competition have dragged down childcare centre operator G8 Education’s (ASX: GEM) full year guidance below expectations.
G8’s interim underlying EBIT was $51.6 million for the half, in line with consensus forecasts and up 7%. Revenue was $430.6 million, an increase of 9% on the prior corresponding period, driven by occupancy, fee growth and centre acquisitions.
Net profit after tax reduced 20% to $19 million, which was impacted by new accounting standards.
The news disappointed investors with G8 shares falling 44 cents or 16.06% to close lower at $2.30 yesterday.
Managing director, Gary Carroll said that while the success of the group’s 2017 acquisitions gives cause for confidence in the medium‐term potential of the greenfield portfolio, the “ramp‐up” of the 2018 and 2019 centres is taking more time.
This would result in an $8 million forecast reduction in CY19 EBIT contribution from the centres, and like‐for‐like occupancy growth is expected to be in the mid 1% range.
Carroll said that balancing the performance of organic centres with caution in relation to the market environment, the forecast underlying EBIT range for CY19 is $140 million to $145 million. This was below expectations of about $151 million.
G8 shares took a hit of more than 16% in response to close at $2.30, down from $2.74.
“Net supply growth for the half is lower than the pcp, reflecting signs of moderating supply growth, although prevailing conditions are likely to remain challenging,” Carroll said.
He also warned that second half growth rate would not have the benefit of the federal government’s child care subsidy that was introduced on 1st July 2018.
Average like‐for‐like occupancy grew 1.5% points, underpinned by the implementation of the customer engagement centre, group‐specific initiatives and the child care subsidy.
A fully franked first half dividend of 4.75 cents per share was declared, up by 0.25 cps.