Australia’s largest private child care operator slashes 40 centres
G8 Education, Australia’s largest private childcare center operator, plans to close up to 40 centers – around 10 per cent of its local operations – in response to continued occupancy decline, rising costs and the impact of last year’s childcare sexual abuse scandal.
Ahead of its shareholder meeting in Brisbane on Wednesday, the G8 told investors it would suspend operations at around 40 underperforming centers and consider “longer-term options, including lease transfer, disposal or other alternatives” for those centres.
The group has not yet announced which centers are at risk of closure.
The G8 does not expect a rapid recovery from a slump in the childcare sector, with occupancy falling compared to 2024 and 2025. The group blames sustainable affordability pressures, falling birth rates, increasing supply of full-day care, as well as “trust being impacted by serious child safety incidents”.
“The operating environment means G8 Education does not expect a significant improvement in occupancy compared to PCP [prior corresponding period] We will continue to review the Group’s operating model and cost base this year and adjust where appropriate,” G8 CEO Pejman Okhovat said.
The company’s shares fell to a 16-year low of 16.5 cents and fell more than 87 per cent last year after pedophile Joshua Brown was charged over allegations of sexual abuse of children in his care at centers in Victoria. Among these were G8 Training centres.
Wednesday’s update confirms a worrying exodus from operator hubs continues. At the same time, the company faces increased regulatory and compliance costs in response to the scandal, including the installation of CCTV at its headquarters.
As of April 24, G8 reported that occupancy levels in its centers were 56.4 percent, down 7 percent compared to the previous period, and that the occupancy rate since the beginning of the year decreased by 7.9 percent to 56.1 percent.
“In response, it proactively evaluated its network to ensure we remain well positioned to continue to deliver quality early education and care that is sustainable, resilient and safe over the long term. We have carefully considered where our resources can be most effectively allocated to support quality early education and care outcomes,” Okhovat said.
That level of decline in occupancy would typically create a full $40 million impact on earnings before interest and taxes (EBIT), RBC Capital analyst Wei-Weng Chen said.
“None of the reduction steps announced by the G8 have been quantified, so it is difficult to accurately determine the full earnings impact at this time,” he said.
G8 is also losing investors’ support.
Earlier this year, Vision Super sold its childcare business, putting the company on a list of excluded investments alongside tobacco companies and arms manufacturers.
“The media coverage of events at G8 Education is extremely disturbing,” said Michael Wyrsch, the super fund’s chief investment officer.
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Colin Kruger is senior business correspondent for the Sydney Morning Herald and The Age newspapers.Connect via email.
