Trading Performance, page-6

@Islay,

I am not sure what the expectations are within the sector; personally, I do not envisage any big changes in occupancy rates as a sole effect of the Package, I just think the new rules can act as a marginal tailwind.

Why? Very simply because 1) The total amount of government subsidy is going to increase and 2) Childcare demand is virtually 100% correlated with female participation in the workforce (not with the total number of jobs in the economy), and that is going to be incentivised by the new rules.

You may well have a point in saying that childcare should not get constantly linked with jobs, but the relationship between the two things is unlikely to disappear any soon.

Regarding occupancy, Mayfield may have marginally higher rates, but they are still too small in order for that to be statistically relevant; and Evolve operate in New Zealand, which is a wholly different market.

It is also important to note that high occupancy rates alone do not imply a better performance of the business. For instance, Evolve have just reported flat year-over-year NPAT despite a 10% increase in revenue, because of sharply increased employee and occupancy costs; their EBITDA margin is now below 17.5% (and getting worse), which is a very different situation vis-à-vis G8, who have higher and improving margins. Note that I am not saying this for the sake of point scoring against you; I know it because I also have a (smallish) shareholding in EVO, and am not happy with their result.

You may be right that a rebranding of the business along the lines of what Evolve are trying to do in NZ could be beneficial to G8, given the number of operating names they have (although I guess they do want to stick with the all brands that are performing well). The information about Affinity is relevant and interesting.

Cheers