Weak Performance in 1H 2018 due to considerable regulatory changes and challenging industry conditions: G8 Education Ltd.’s (ASX: GEM) stock plummeted 14.8% on August 27, 2018 (3 PM AEST) after the company for the first half of 2018 has reported 23.9% fall in the underlying net profit after tax to $25.6 million.
The underlying EBIT fell by 21.2% to $48.1 million on back of higher Q1 wage costs from regulatory changes to required staff ratios, though this is in line with market consensus. Wage ratios have returned to prior year levels by May, reflecting an improved wage outcome to be expected in the second half. The average like-for-like H1 2018 occupancy was down 2.5% to 70.1%, however, the recent data reflects encouraging early signs of improvement, as July 2018 occupancy rose to 74.5%, which is a 2.2% rise over June 2018. August occupancy growth is ahead of last year’s levels. Additionally, GEM expects the H1/H2 Earnings Before Interest and Tax split to be similar to prior years, being approximately 34 : 66. GEM stock has fallen 5.84% in three months as on August 24, 2018 and is trading at a P/E of 12.79x.
1H 2018 Financial Performance (Source: Company Reports)
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