Australian Investment Blog
ASX:GEM 27/08/2018
G8 gets taught a lesson
Stock
G8 Education (ASX:GEM) $2.05 as at 27/08/2018
Event
Childcare provider G8 (ASX:GEM) announced first half results this morning that were below market expectations. The company has had a rough couple of months as it deals with a ‘very fluid market’ in terms of childcare demand, increasing supply and of course, changing Government regulation which is putting upward pressure on costs.
G8 saw significant decline in occupancy over the half, down to an average of 70.1% over 1H18 vs 79% in 2H17 or 72.6% in 1H17. The trend resumed its move lower for the company, more than reversing the positive headway it had made last year. Along with falling occupancy, wage costs alone grew $7.2m over the half and another $1.2m was spent on training.
*note: small sample size for consensus numbers in this stock.
Key to the guidance miss was clarification from G8 that EBIT is expected to be skewed 34:66 first half vs second. This suggests EBIT of $141.5m for the full year, -7.5% below current consensus EBIT for the full year which is at 153M.
G8 Education (GEM) Chart
Market Matters Take/Outlook
G8 Education has been in a 12 month downtrend as it battles a number of headwinds to itself and the industry. It cheap but cheap for a reason. We have no interest.
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