G8 HITS BACK AT FEARS OVER BALLOONING CHILDCARE COSTS

Written on the 21 April 2015 by Nick Nichols

G8 HITS BACK AT FEARS OVER BALLOONING CHILDCARE COSTS

SHARES in G8 Education have taken another hit today as federal changes to the childcare industry have raised concerns that costs could rise by as much as 4.7 per cent.

However, the Gold Coast-based G8, Australia's largest listed childcare centre provider, has moved quickly to douse that assumption by announcing its costs would be just 2.8 to 3.2 per cent higher.

G8 says the changes to staff-child ratios due to be introduced in January next year will add between $2 and $2.20 to the cost of each child enrolled in its centres. This is well below some headline assumptions that parents could face an extra $10 a day to place their children in childcare.

"If the changes are introduced as planned on January 1, 2016, then it is anticipated that overall costs will rise by approximately 2.8 to 3.2 per cent, with the actual quantum dependent upon occupancy levels across affected individual rooms/centres and differences by state," says G8 Education in a statement to the ASX today.

The federal government has been working towards implementing a National Quality Framework for the childcare sector since 2010 and introduced the first round of changes involving staff-child ratios in 2012.

The framework is designed to create a uniform national approach to the regulation and quality assessment of education and childcare services in Australia.

The changes have prompted institutional broking firm CLSA this week to estimate that they will lift costs to childcare operators by 4.7 per cent.

The report is seen as a trigger for the latest G8 share sell-off, which saw more than 9.5 million shares changing hands today. The shares fell more than 6 per cent to a low of $3.30.

The Australian Childcare Alliance has warned for some time that parents face higher costs due to the proposed changes, with president Gwynn Bridge revealing this week that a recent survey of childcare centres has shown increases of $10 a day could be likely.

G8 Education says it is waiting on the federal government to reveal its family care package before announcing any policy changes.

Among the unknowns are how much assistance the government will provide in the federal budget in May.

G8 managing director Chris Scott reiterated that the company's cost-increase estimates are well below market assumptions.

He also takes an existential view to the company's share price which has been impacted by the uncertainty around the childcare reforms over the past year.

"Markets undershoot and overshoot, but eventually they get it right," he says.


Author: Nick Nichols

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