Hi Jaffaroo, Certainly Gem, AFJ and TNK all took a bit of a hit...

Hi Jaffaroo,

Certainly Gem, AFJ and TNK all took a bit of a hit today.

I think the volatility comes from two points of uncertainty. The first related to the findings of The Productivity Commission. Scott Morrison has stated that he views the Productivity report " as a valuable resource". The objective of the Commission was how to increase parental participation in the workforce. The report states that there may be around 165,000 parents who would like to work, but are unable to do so because of access to suitable childcare and the cost involved with that care. Streamlining the government subsidies, is long overdue, but will the government increase the subsidies to childcare? In my opinion there is an option, that would see more funding distributed to families, but still not increase the overall government spending. Currently centres receive an enrolment advance of around $140 for every child enrolled in the centre. this also applies to other forms of regulated care. This is basically an interest free loan to centres that is repaid to the government when the child exits the centre. It doesn't affect the profitability of centres, but could affect their cash flow position. The amount currently being held by centres is in excess of $200m. Redirect that funding into parent subsidies, making childcare more affordable to those who need it most. It is a small amount but should be redirected to parents. I have no doubt, given the current opinion polls that the government will seek to increase funding.

The second point is the changes to ratios in 2016. The improved ratios in 2016 are part of The National Quality Framework, they have already been legislated. Most centres work on legislated ratios with a floater. This change will see the majority of centres with reduced profits. Will centres pass those increases onto parents? If so parents will seek other options, one of those options will be the subsidised nanny scheme, if endorsed by the government.

G8 was the only corporate for quite a few years. They are now competing with three other corporates and the aggressive buying and perhaps, poor capital management is making shareholders nervous.

Yesterday, on this forum, kpkg posted a summary of submissions to the Productivity Commission. The costings and reduction of licensed places and income is very much a reality, with the ratio changes.

IMO shareholders need to see the directors of corporate childcare taking ownership of the proposed changes. Chris Scott stated "we are well placed to deal with the changes" . Affinity have said they welcomed the findings of the Productivity Commission, but no one is communicating with shareholders. Communicate tell shareholders how you are well placed and improve shareholder confidence.

Islay