Hi @Islay, thanks for your feedback. Will owner/provider centres...

Hi @Islay, thanks for your feedback.

Will owner/provider centres pose a threat to G8 over the next decade. Yes and IMO, if G8 do not improve the balance between generating profit and providing continually improving quality of care, that meets the needs of their communities and become connected with those communities, those single operators will not only have higher occupancy rates but waiting lists as well.

I cannot prove nor disprove that single operators will have higher occupancy rates over the next decade; as I said, I am prepared to take your word on the fact that on average they provide a better service.

My key question, from an investor’s perspective, is at what point could this become a disruptive, existential threat to G8?

At the moment, family day care represents about 11% of total centres across Australia. Even if this market share doubled, over the next decade (which seems a rather aggressive assumption to me), that would be barely enough to absorb population growth alone, assuming that total demand for childcare does not decrease.

Therefore, before the increase in family day care starts denting significantly into corporate childcare’s occupancy levels, its annual growth rate needs to be sustainedly in the double digits. Even if that were indeed the case, the first corporate operators to suffer would be the low-margin ones, not G8.

What I am inclined to conclude is that, unless G8 do something really wrong that causes a substantial decrease in their own occupancy rates alone, the structural backdrop is such that a disruptive effect due a possible increase in single operators is very unlikely.

And that is before even starting to factor in whether or not the childcare sector is ripe for further consolidation.

IMHO & DYOR