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Gold Coast-based childcare operator G8 Education (ASX: GEM) has launched a sweeping cost and network restructure including the suspension of 40 underperforming centres, a reduction of its support office workforce and new procurement savings as it battles a sharp decline in occupancy across its 395-centre portfolio.
The news drew a savage response from investors who pushed the company's shares more than 30 per cent lower to 16.5c in early trading.
G8 Education has revealed that spot occupancy at the end of last week had fallen to 56.4 per cent, down 7 percentage points on the prior corresponding period.
Year-to-date occupancy sits at 56.1 per cent, a 7.9 percentage point decline on the same period last year.
G8 says the occupancy deterioration reflects a combination of sector-wide headwinds including cost-of-living pressures eroding family demand, falling birth rates, increased centre supply and weakened family confidence following serious child safety incidents across the early childhood education and care sector.
The operator does not expect occupancy to materially recover during 2026 and has moved to proactively right-size its cost base.
The 40 centres earmarked for suspension are in addition to procurement savings and a reorganisation and reduction of G8's support office.
“in this environment, G8 Education’s focus remains firmly on safety, high quality education and care, disciplined execution, as well as efficient and effective management of the areas within its control," says G8 Education CEO Pejman Okhovat.
“While the operating environment means G8 Education does not expect a material recovery in occupancy relative to previous corresponding period this year, we will continue to review and adjust the operating model and cost base of the group where appropriate,”
In response to the slump in childcare centre occupancy, Okhovat says G8 Education has "proactively assessed its network to ensure we remain sustainable, resilient and well positioned to continue delivering safe, high quality early education and care over the long term".
"We have carefully considered where our resources can be most effectively allocated to support quality early education and care outcomes,” he says.
The latest trading update comes against the backdrop of a bruising CY25 result in which G8 reported a statutory net loss after tax of $303.3 million for the calendar year, weighed down by a $349.1 million goodwill impairment charge.
Addressing shareholders at the company's annual general meeting today, chair Debra Singh says CY25 had been "one of the most challenging and defining years in G8 Education's history".
"Events across the sector, including the horrific incidents in Victoria, had profound impacts on families, educators, regulators, shareholders and the broader community," says Singh.
"They tested confidence and trust in early childhood education and care providers nationally and required deep reflection across the sector."
Singh says that while sector conditions remain challenging, the board is confident in the company’s "strategic direction, leadership and commitment to continuous improvement".
"We have confidence in our leadership team and in the strategy they are executing to take the organisation forward," she says.
"As we continue to strengthen our service offering, our focus is on building on the confidence and trust already placed in us by more than 36,000 families who attend our centres, while extending that same trust to more families across the communities we serve.
"While this will take time, the board is optimistic about the opportunity ahead to strengthen that trust, build confidence, and position G8 Education as a leader in the ECEC sector."
G8 Education operates one of Australia's largest for-profit childcare networks, with centres across every state and territory.
Shares in G8 Education were trading 7c lower at 17c at 11.26am (AEST).
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