Shares in G8 Education slid 23.1% to $3.40 after the childcare provider cut its projected earnings guidance for the year to December 31.
In August, the Gold Coast-based company announced underlying earnings would be close to $170 million, but this has now been to $160 million causing shares to plunge by a quarter at one stage yesterday.
That’s despite the $160 million still being up 5% on 2016’s figure (ie the market’s reaction was illogical).
According to the company, a slowing of occupancy growth caused the downgrade with like-for-like occupancy for 2017 now expected to be 77% compared to 79.7% in 2016.
The company said business had been hit by a recent slowing in centre occupancy growth, ongoing sluggish wages growth and supply issues in key regions like Western Sydney and inner Melbourne.
But that had been compounded by more states than it had expected amending staffing ratios which meant G8 needed to use temp agency labour and bringing a likely $3 million higher bill.
"While G8 had been aware that current arrangements were due for review by regulators in a number of states, we expected other states to mirror Queensland by extending the current structures until the end of 2019," the group told the ASX on Monday.
G8 managing director Gary Carroll said the group expected challenging market conditions to continue for the next six to nine months.
"While supply has been moderating over the course of 2017, the impact of new supply over the last 18-24 months has resulted in a challenging occupancy environment in FY2017," Mr Carroll said.