Childcare in upheaval as losses, closures, and plunging revenue mount

The news from Australia’s commercial childcare providers this week illustrates the all-encompassing crisis embroiling the industry – and who is paying the price to fix it.

Listed childcare provider G8 Education reported a plunge in revenue and occupancy for the June half year, as well as a $39 million loss for investors who have watched the stock drop around 90 per cent since last year when the childcare sex abuse scandal erupted.

Part of the loss related to writedowns from the suspension of 40 struggling centres which seem unlikely to reopen. On a conference call with investors following the half-year results, G8 executives did not rule out further centre closures.

G8 chief executive Pejman Okhovat said the recent closures are part of the reason the plunge in occupancy across its remaining 359 centres was alleviated slightly in June. Spot occupancy was down just over five per cent compared to this time last year.

“We’re hearing anything from kind of minus five per cent, minus six per cent to about minus 15 per cent on previous years. And unfortunately, as you’ve noticed, we’ve seen an increasing number of operators that are actually just closing down as well,” Okhovat said.

G8’s cannibalisation strategy is providing a modest pay-off, but its staff and parents won’t be celebrating.

What was not evident in the numbers presented to investors this week is the 1600 staff who no longer work for G8, and 7000 children no longer in its care – largely a result of the closures.

If this wasn’t sobering enough, the following day, private equity owned Edge Early Learning went into voluntary administration, putting the future of its 70 centres in doubt.

“We understand that this may be a confusing and stressful development for families who rely upon Edge Early Learning to provide care for their children,” the company said on its website .

This month its landlord, Arena Real Estate Investment Trust (REIT) saw its shares plunge after it revealed Edge was no longer paying rent on 31 properties Arena owned, and a default notice had been issued. The deadline for remedying the default expired this week.

And while the company says it is operating its centres on a “business-as-usual” basis, parents and staff will already know that this term has a rather loose interpretation at Edge.

In April, multiple incidents with Edge centres in South Australia culminated in one centre being suspended from operating for three months due to repeated serious supervisory breaches. It isn’t the only one.

According to media reports, as many as five centres have been suspended from operating since last year for breaches – and at least one of them for three months.

All of Edge’s South Australian customers were left scrambling on May 1 when the group took the desperate step of a “Statewide Day of Action” to give every employee additional training to address the regulatory-induced chaos.