Childcare is certainly a fickle business - slave to the...

Childcare is certainly a fickle business - slave to the ever-changing vagaries of government policy, employment trends, parent expectations, property prices, wages growth - the list goes on and on.  However, that is not so different to most other service industries, though they all have their own particular and peculiar characteristics.

Articles canning child care groups just don't get it: this service industry operates at the edge, beholden as it does to the above vagaries.  There seems to be a complete ignorance of the leverage that a corporate approach brings: funding, recruitment, training, marketing, lobbying, etc can all be done at a commercial scale.  And, of course, there is the goodwill component (arguably a positive or a negative for any one company like GEM!).  A single, independent centre forking out $2,000 to train one helper blows the profit for the month.

GEM has delivered growth in shareholder returns averaging 21.6% pa over the last 10 years and 22.3% pa over the last 5. Recently, it has been less successful: -0.6% pa over the last 3 and -0.9% over the last year.  It could be argued that the earlier higher returns are dominated during the early periods by massive growth.  Now that acquisitions have tapered off, the hard slog of cost reduction, and the dance these centres need to do with government regulation, dominate.

GEM has been a high yield stock.  While others might decry the change in their dividend policy (going from quarterly (an oddity in the Australian share market) to semi-annual payments, and reducing the payout is actually exactly what they need to do to address debt.