The G8 Education Ltd (ASX: GEM) share price is down 12% after downgrading its guidance expectations.
G8 Education is one of the largest childcare providers in Australia.
Weak update
G8 Education noted in the ASX announcement that in its HY25 results announced in August, occupancy for the week ending 22 August 2025 was lower than the prior corresponding period.
The company had noted that the macroeconomic environment remained challenging, with affordability and cost-of-living pressures continuing to impact families. At the time, occupancy was 67%, 5.9% lower than the prior year, and year-to-date occupancy was 65%, 4.1% lower than the prior year.
It also pointed out in August that it was continuing to focus on initiatives to support traditional seasonal occupancy growth in the second half together with “diligent cost management and procurement initiatives”, it expected its EBIT (lease-adjusted) to be similar to 2024.
However, it hasn’t played out how the company hoped. It revised its full-year earnings expectations to be in the range of $91 million to $98 million.
What went wrong?
It said families continue to face cost-of-living pressures and there are lower enquiry levels compared to last year, as well as ongoing sector-wide challenges.
The expected seasonal increase in occupancy in October did not occur.
The trajectory for occupancy for the rest of the year is expected to be weaker than last year. At 2 November 2025, the occupancy was 68.3%, 6.6% lower than last year, with a year-to-date occupancy rate of 65.7% – 4.5% lower than last year.
It continues to work with the Federal and State Governments and regulators, while welcoming the scrutiny and changes that are aimed at providing better outcomes for children and G8 Education’s team.
It’s advocating for harmonisation of Early Childhood Education and Care (ECEC) policies and regulations to ensure high quality education and care across Australia in ECEC settings.
G8 said it will continue to invest in strengthening the recruitment, training and development of its team, while improving the safety, quality and educational practices. It has also committed to the rollout of CCTV across its network, starting in 2026.
Any positives?
The business said it’s focused on optimising its current enrolment and transition period as 2026 approaches. It also expects that the abolition of the activity test for three days of care will increase demand in 2026 across the sector.
Plus, it’s managing the controllable costs “well”.
Final thoughts on the G8 Education share price
The business is clearly going through a rough time.
I’m not sure whether this is a beaten-up opportunity or whether it’s now difficult to make profits in the sector.
The share price is almost as low as it was during the worst of COVID-19 (when in-person childcare activity was smashed).
There could be a recovery play here, but there are other, less risky ideas out there.
