The Brisbane-based childcare operator provided a sobering 1Q22 trading update yesterday talking to continued disruption from Omicron and recent impacts from floods. Both of those aspects have an impact on occupancy levels which were 2.1% below last year in February, although recovered to be only 0.8% lower by March. Staffing issues caused some higher employment costs due to the use of agency staff however they did talk to improving trends right across these metrics by the end of March. They also outlined further cost reductions at head office ($15m-$18m annualised) and it seems at this point that lower occupancy at the start of the year is likely to be transitory given a strengthening pipeline of inquiry, tours, and conversions. All in all, we left the conference call yesterday feeling ‘okay’ about the year ahead for G8.
MM remains long GEM in our Income Portfolio
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