G8’s new obstacle
jenny.rogers@news.com.au shares at above the market price of $3.88 a share.
G8 yesterday said CFCG had paid the initial tranche of $63.84 million in February.
The second and final tranche of $148.96 million was due yesterday.
It seems CFCG has been unable to cough up the cash and asked for an extension.
G8 said it is in discussions with the investor over the request for time to pay. The trading halt is due to be lifted tomorrow, indicating the delay may be sorted quickly.
G8 has earmarked the $213 million to pay down a $50 million bond, due in February 2018.
It also is to fund acquisitions worth around $200 million in Australia due for settlement in the next two years.
G8, which holds its annual general meeting in Main Beach on May 29, is counting on the cash after agreeing to buy 49 centres in Australia.
G8 CEO Gary Carroll previously said the firm is looking at expansion in China after the capital-raising.
“Over the next few months, we will evaluate whether there are viable opportunities for G8 to utilise its expertise to collaborate with CFCG in the childcare and early education market in China,” he said.
Mr Carroll said G8 had “a significant pipeline” of committed and potential acquisition opportunities.
“Raising capital will enable G8 to deliver on an additional $100 million of network growth opportunities above that possible from internally generated cash flows alone, while maintaining prudent gearing levels,” Mr Carroll said.
Hunter Green’s Charlie Green said: “I’m surprised about the delay but G8 has plenty of headroom without the new equity.”
“As usual, the share price will ultimately reflect the operating performance of the company, not whether there’s a delay to the capital raising, and so far the performance has been good.”
The payment delay comes after G8 was forced to answer a “please explain” from the ASX a fortnight ago after its shares were smashed in heavy trading.
G8 then pointed to a research report from Canaccord Genuity, which showed analysts were concerned about an oversupply of childcare centres in Australia.
The broker was worried over a “noticeable jump” in the number of childcare centres opened in March.
Shares in G8 then fell 8.04 per cent, to $3.43. Shares yesterday were trading at $3.45 when the halt was called.