GEM buy?, page-237

Childcare giant G8 Education has hit up landlords for a 50 per cent rent reduction, far higher than flagged to the market and greater than the hit to top-brass pay.
Such a rent reduction – if successful – would mean G8 would potentially move from breaking even to being cash-flow positive while benefiting from government subsidies.
The company would not answer some queries in detail. According to the investor presentation, a 20 per cent rent reduction would mean monthly rental costs of $8 million. But a Financial Review calculation of figures provided to investors suggests that if all landlords agree to a 50 per cent cut, monthly rental costs would be $5 million.
Conservative estimate

Carter Bar Securities analyst Peter Drew said in a note to clients that G8's assumption of a 20 per cent rent reduction was conservative and he estimated it could achieve a 50 per cent reduction. "Given the transparency on revenue [ie 50 per cent fall] we think this should make it easier for G8 to negotiate a similar reduction in rent," he said.

"To the contrary, we think the level of support currently set at 50 per cent of fee revenue … is likely to be increased as demand for childcare services increases" in the next few months.
Mr Drew argued G8 would emerge from the pandemic with a substantially stronger balance sheet and stable or improved market share.