G8 Education shares plunge 29% after closing 40 centres amid inflationary pressures
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The news: Shares in G8 Education tanked in afternoon trade after the early childhood education operator announced the suspension of 40 centres, citing cost of living and socio-economic challenges.
The numbers: Shares had fallen 29.2% to 17 cents at 12:52pm AEST.
As of 24 April, G8’s spot occupancy stood at 56.4%, representing a 7% decline compared to the last quarter, bringing the year-to-year occupancy rate to 56.1%, a 7.9% drop from the previous corresponding period.
The context: G8 stated that the significant drop in occupancy rate was driven by families facing affordability issues, falling birth rates, increased long-day care supply, and a decreased confidence following a recent child abuse incident.
As a result, the company has suspended operations at 40 underperforming childcare centres as part of its cost saving initiatives, adding that it will explore longer term options for these sites, including potential lease surrender or divestments.
What they said: “While the operating environment means G8 Education does not expect a material recovery in occupancy relative to [the previous corresponding period] this year, we will continue to review and adjust operating model and cost base of the group where appropriate,” CEO Pejman Okhovat said.
The source: ASX
