Have ASX childcare stocks weathered the COVID-19 storm?
ASX childcare stocks are gradually recovering from COVID-19 but they did take a hit.
Childcare stocks fell with their peers during the COVID-19 crash in March – the month COVID-19 first hit Australia and began to spread around the world.
Then it paid a “transition payment” of 25 per cent of fee revenue for two and a half months afterwards – conditional on centres capping their fees at pre-pandemic levels and guaranteeing jobs.
Yesterday’s inflation data showed that childcare had surged again in the last quarter. Quarterly CPI jumped 1.6 per cent and childcare was the largest contributor.
Andrew Tomadini, head of prices and statistics at the ABS, said but for childcare, the CPI increase would have only been 0.7 per cent.
All ASX childcare stocks are up in the last six months yet only one is in positive territory on a 12-month basis.
While it saw a drop in attendance during April, things improved during May and June.
Its financial position improved over the next few months. In July, it forked out $5 million in buying six Nido childcare outlets.
Then in August, it unveiled a 62 per cent rise in net profit and said it had a pipeline to deliver new services with an end value of $100 million over the next 36 months.
G8 Education (ASX:GEM), the largest ASX childcare stock, saw an immediate impact on centre occupancy and opted to raise capital.
While occupancy improved in May and June, the COVID-19 dip caused a 28 per cent dip in full year revenues.
In recent days it has divested from its Singapore business for S$8.7 million and will use the cash to reduce debt.
Mayfield Childcare (ASX:MFD) also saw a dip in occupancy and its profit, but credited the government’s program with certainty of revenue during the difficult times.
Yesterday it predicted a calendar year profit after tax between $3.8 million and $3.9 million.
It noted Victoria’s Stage 4 restrictions were a challenge but welcomed the extension of the government’s package, just for Victorian centres, until January 31 next year.
Kip McGrath Education Centres (ASX:KME) last updated its shareholders in August when it reported full year results.
While it admitted second half franchise fee revenue was affected by over $2 million it still made a $1.6 million net profit.
Although all stocks are up in six months, Kip McGrath is the only stock in this group that is in positive territory on a 12-month basis.