Childcare group G8 eyes China expansion

G8 Education is growing at home and could expand into China after a Hong Kong-based investment company agreed to buy a $213 million stake in the childcare provider.

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G8, which owns 510 childcare centres in Australia and Singapore under 20 brands including First Grammar, Jellybeans, Penguin and Pelican – says the deal with CFCG Investment Partners International (Australia) will help fund 49 acquisitions across Australia totalling about $200 million over the next two years.

The company will also pay down debt, some of which it accrued in the second half of 2016 through the $52 million acquisition of 12 centres.

G8 announced the deal with fundraising deal with CFCG as it posted a drop in annual net profit due to higher costs related to its expansion across Australia and Singapore.

Managing director Gary Carroll said it will consider possible opportunities with CFCG in China following the capital raising.

“Over the next few months, we will evaluate whether there are viable opportunities for G8 to utilise its expertise to collaborate with CFCG in the childcare and early education market in China,” Mr Carroll said.

CFCG has made a series of investments over the last two years to build its presence in the education sector in China, according to G8.

G8 said on Monday it will issue 54.8 million ordinary shares at $3.88 each to CFCG, which is owned by China First Capital Group.

G8’s full-year net profit dropped nine per cent to $80.3 million due to the cost of its 2016 expansion across Australia and Singapore.

At the end of December, G8 had 490 childcare centres across Australia and 20 in Singapore.

Revenue for the 12 months to December 31 rose 11 per cent to $777.5 million from $703.5 million, but G8 also spent money on centre upgrades, refurbishments and staff development.

On the 2017 outlook, G8 said its trading performance in January was “slightly” ahead of budget and last year. However, occupancies in the ACT, North Queensland and WA remain challenging.

Occupancy fell 2.2 per cent in 2016 from a year earlier, due to increased supply in the ACT and pockets of NSW, primarily the Northern Beaches and inner Sydney.

There was general market-wide weakness in WA and North Queensland.

G8 shares rose 12.5 cents, or 3.5 per cent, to $3.685 on Friday.

G8’S FY FIGURES

* Net profit down 9pct to $80.3m

* Revenue up 11pct to $777.5m

* No final dividend, unchanged. G8 paid four quarterly dividends of 6 cents a share.