G8 Education resets its network as occupancy pressures weigh on half-year performance

G8 Education Limited (ASX: GEM) has reported a statutory net loss of $38.8 million for the first half of CY26 as subdued occupancy, affordability pressures and the suspension of operations at 40 centres weighed on performance.

The early childhood education and care provider, which operates approximately 350 centres across Australia, used its half-year results to outline a broader operational reset encompassing network optimisation, support office restructuring, cost reduction and continued investment in safety, quality and workforce stability.

Alongside the results, G8 announced changes to its Board and the leadership of its Audit and Risk Management Committee, reinforcing the organisation’s focus on governance and financial oversight during a period of significant transition.

Anne Lockwood will join G8 Education as a Non-Executive Director from 1 September 2026 before succeeding Peter Trimble as Chair of the Audit and Risk Management Committee on 21 October.

Mr Trimble will step down as a Non-Executive Director and committee chair on 20 October after six and a half years with G8.

Ms Lockwood brings more than 33 years of experience spanning finance, audit, risk management, corporate governance, corporate advisory and mergers and acquisitions.

Her career includes 18 years with Arthur Andersen and EY, as well as executive roles as Chief Financial and Commercial Officer of ASX-listed Integral Diagnostics and Chief Financial Officer of Planet Innovation.

She is currently a Non-Executive Director of ASX-listed Symal Group, Genetic Signatures and Coventry Group.

G8 Education Chair Debra Singh said Ms Lockwood’s audit, financial and governance experience made her a strong successor to Mr Trimble.

“Anne’s deep expertise in audit, financial oversight and risk management, together with her ASX-listed executive and non-executive director experience, will ensure G8 Education’s Board capabilities remain strong,” Ms Singh said.

The appointment forms part of a wider governance focus evident across G8’s CY26 disclosures, including a dedicated Board Safety Committee, a refreshed enterprise risk management framework and the publication of the company’s first climate-related financial report.

G8 reported a statutory net loss after tax of $38.8 million for the six months to 30 June 2026, compared with a profit in the prior corresponding period.

The result was primarily driven by $47.1 million in net impairment expenses, which were affected by the suspension of operations at 40 centres.

Excluding impairment expenses and other post-tax non-trading items, G8 recorded an operating net profit after tax of $6.7 million, down 73.7 per cent on the prior corresponding period.

Other key results included:

• Revenue of $413.6 million, down 11.1 per cent
• Lease-adjusted operating EBIT of $14.7 million, down 63.7 per cent
• Net debt of $123.6 million, approximately six per cent higher than at 31 December 2025
• Capital expenditure, excluding software-as-a-service expenditure, of $22.1 million

G8 remained compliant with its financial covenants during the reporting period and extended the maturity of the first $100 million tranche of its revolving debt facilities from December 2027 to January 2029.

No interim dividend will be paid for the half-year ended 30 June 2026.

Occupancy was the most significant pressure on G8’s half-year performance.

Group occupancy averaged 57 per cent during the period, 7.5 percentage points below the prior corresponding period. When centres suspended during the half were excluded, like-for-like occupancy was 59.7 per cent, down 7.7 percentage points.

Spot occupancy was 61.9 per cent for the week ending 21 August 2026, 5.1 percentage points below the prior corresponding period.

G8 attributed the result to several interconnected factors, including:

• Affordability and cost-of-living pressures
• Reduced demand and lower permanent booking levels
• Low birth rates
• Continued growth in the supply of new centres
• Increasing competition in some local markets

The company said net supply had grown by 2.5 per cent in the latest quarter, although the rate of supply growth had declined for two consecutive quarters and was at its lowest level in 10 quarters.

In response, G8 has revised its approach to national, regional and local marketing, introduced centre-specific growth plans and increased Area Manager support.

It is also working to improve centre tours and enrolment processes, accelerate the acceptance of casual bookings through digital tools, and test disciplined pricing structures and flexible-day offers in selected markets.

These initiatives contributed to a two-percentage-point improvement in enquiry-to-enrolment conversion, which reached 32 per cent.

G8 announced in April that it would suspend operations at approximately 40 centres as part of its response to challenging operating conditions.

The half-year report confirms that all 40 suspensions occurred during the six months to 30 June.

Of the affected centres, one had been divested and three had reached the end of their leases or had their leases surrendered by the end of the reporting period.

Across the broader network, G8 reported two centre divestments, five surrendered or expired leases, and the closure and merger of one outside school hours care service with an existing long day care centre.

The company has indicated that portfolio optimisation will continue, with underperforming centres to be assessed as it seeks to strengthen its overall network footprint.

While this reset has contributed to significant impairment expenses, it is also intended to redirect management attention and capital toward centres and markets with stronger prospects for sustainable performance.

Despite the financial and occupancy pressures, G8 reported continued improvement across several workforce, family experience and quality measures.

At the end of the half:

• 97.4 per cent of centres were rated Meeting or Exceeding the National Quality Standard
• 98.6 per cent were rated Meeting or Exceeding in Quality Area 1
• Net Promoter Score increased seven points to 58
• Team retention reached 80 per cent, its highest level in six years
• Early childhood teacher vacancies declined by 57 per cent
• Seventy-three per cent of Centre Manager appointments were filled through internal promotion
• Psychological safety increased to 75 per cent

G8 said its workforce engagement remained above Australian and sector benchmarks despite the organisation undergoing significant change.

The provider has also continued its collaboration with Act for Kids to implement the Emmy and Friends protective behaviours program across its network.

Safety, safeguarding and regulatory compliance remain prominent elements of G8’s operating model.

During the first half of CY26, the organisation delivered approximately 118,000 hours of training across its workforce and continued to embed safety leaders within its centres.

G8 reported that its statutory compliance actions declined by five per cent compared with the prior corresponding period, while sector-wide statutory compliance actions doubled over the same period.

The company also reported:

• An approximately 25 per cent reduction in reportable compliance incidents
• A 56 per cent reduction in high-risk compliance incidents
• Continued implementation of its Child Safe Organisation Plan
• Additional support for centres identified as requiring closer attention
• Ongoing compliance assurance across the network

CCTV pilot is scheduled to commence in the third quarter of CY26 and will inform any broader rollout during CY27.

G8 has also restructured its support office to sharpen operational accountability and reduce its cost base.

The restructure resulted in a 21 per cent reduction in support office headcount, alongside an increase in the number of Area Managers providing direct support, coaching and performance oversight to centres.

Together with procurement and other cost initiatives, the changes are expected to generate annualised savings of at least $10 million.

Technology investment is continuing through new payroll, facilities and maintenance systems, greater integration of procurement and incident management platforms, and the use of artificial intelligence across marketing, operational analysis and administrative processes.

G8 said the changes are intended to improve visibility, reduce administrative complexity and strengthen centre-level execution.

G8’s half-year disclosures also reported progress against several environmental measures.

Compared with the prior corresponding period, the company recorded:

• An 18 per cent reduction in Scope 1 and Scope 2 carbon emissions
• An 11 per cent reduction in waste by weight
• An 18 per cent improvement in its recycling rate
• Solar generation of 506 MWh across 49 sites, including its Varsity Lakes headquarters

The publication of G8’s first climate-related financial report reflects new Australian reporting requirements and forms part of the provider’s developing climate risk and governance framework.

G8’s CY26 half-year results depict an organisation focused on stabilisation, stronger execution and financial sustainability rather than network expansion.

The suspension of operations at 40 centres, support office restructuring and continued portfolio optimisation demonstrate the scale of the response to lower occupancy and changing market conditions.

At the same time, improving workforce retention, family satisfaction and quality ratings provide more positive indicators as the organisation works through its reset.

The central question for the remainder of CY26 and into CY27 will be whether G8 can translate its stronger conversion, marketing, pricing and centre-level initiatives into sustained occupancy growth.

With affordability pressures continuing and demand varying significantly between local markets, the results also highlight a broader challenge for the early childhood education and care sector: service supply alone does not guarantee sustainable utilisation.

For G8, the next stage will be about demonstrating that its network reset can produce stronger centre performance without compromising safety, quality or workforce stability.

Read the half year report and investors presentation report here.