Cash relief great for G8

GOLD Coast-based childcare giant G8 Education has revealed it received $160 million in federal funding through the child-care relief package and JobKeeper wage subsidy.

The Gary Carroll-led company, which has 150 staff at its head office in Varsity Lakes and about 475 centres in Australia, released its half-year results on Monday.

Its brands include Sand Castles and Kool Kids.

Mr Carroll said the impact of COVID-19 had been significant with the company’s underlying earnings falling by 44 per cent to $29 million and revenue down 28 per cent to $308 million.

G8 said this was driven by the federal goverrnment capping revenue under its “free” childcare package in place from April 6 to July 12.

The company also revealed the extent of government support under the initial relief package was $89.3 million.

It said it received $70.8 million in JobKeeper payments for the first half.

G8 said it expected to receive $51 million under the government’s transitional support package, which cuts the payment for centres to 25 per cent of fees received prior to March.

Mr Carroll said the government had found the right balance between affordability for families and helping the sector through the COVID crisis.

“The real positive story in the results is firstly we overachieved against our cost savings and cash preservation targets,” he said.

“We are happy with how we are running the centres and protecting the health and wellbeing of our children and families.

“Lastly we have been pleased with how the government has responded with the initial relief package and with the amended relief package.

“I think they have got the balance right between affordability for families, viability for operators and taking account of lockdown situations to ensure the sector manages through the crisis very well.”

Mr Carroll said its staff in Victoria were coping well with lockdown measures.

“We have been working closely with them to ensure we are complying with all the requirements around the number of people that can attend the centres and providing them with alternative work either at the centre or at home to ensure that they remain with the centre and are productive,” he said.

Mr Carroll said the sale of its assets in Singapore – where it has 17 company-owned centres and 18 franchisees – was the result of a refocus on the Australian market.

G8 has suspended its dividend policy (a deferred final dividend for 2019 will be paid in October) and has not provided full-year guidance.

The company said it expected COVID to continue to have an impact.

“A combination of the group’s net debt position, lender support and covenant relaxations until December 2021 provides the group with substantial financial flexibility to withstand a prolonged downturn,” it said.

Morgans analyst Fiona Buchanan said it was a messy result due to COVID-19.

“Near-term trading will likely to be impacted by COVID-driven lockdowns and removal of government subsidies including JobKeeper,” Ms Buchanan said.

“Following capital raising, bank support (including covenant relaxations) GEM can manage through an ongoing downturn.” Shares closed down 4.6 per cent at 92.5c.