G8 EDUCATION SHARES DIVE AMID OVERSUPPY FEARS
FEARS that an oversupply of new childcare centres would squeeze the number of children attending facilities helped weigh down industry giant G8 Education yesterday.
Shares in Gold Coastbased G8, which has 516 centres and whose brands include Penguin Childcare and Kindy Patch Kids, dropped almost 10 per cent during trading yesterday.
They closed down 4.2 per cent, or 11¢ at $2.49.
It followed a report from analysts at Morgan Stanley, who cut earnings forecasts for G8 by almost 15 per cent for the next two years.
“Normalised” profits should hit about $91.5 million in 2018 and $115.8 million in 2019, they estimated, compared to $93 million result in 2017.
G8 had seen profits squeezed last year as occupancy levels decreased from 79.9 per cent to 76.7 per cent.
Morgan Stanley still expects occupancies levels to increase, but at a slower rate than initially expected.
One factor they highlighted was supply of centres increasing 10 per cent while demand was only rising 3 per cent industrywide, impacting on occupancies. “Rational players are acting to shift incremental capital elsewhere and banks’ willingness to lend is declining, but the effects are lagged and not everyone is rational,” they said.
G8 managing director Gary Carroll said occupancy levels had not deteriorated since the last results, and even improved slightly.
G8 was introducing initiatives to improve occupancy such as piloting a call centre, which would take calls for bookings for a number of facilities, he said.