Goodwill Impairment Drives Mayfield’s $21.9M Loss as Occupancy Slumps

Revenue Growth Overshadowed by Earnings Pressure

Mayfield Childcare Limited (ASX – MFD) announced its financial results for the half-year ended 30 June 2025, revealing a complex picture of growth tempered by operational challenges. The company’s revenue rose 14.9% to $43.9 million, largely driven by the acquisition of seven Precious Cargo centres in South Australia. However, this top-line growth masked underlying difficulties as enrolment growth slowed and occupancy rates remained below expectations.

The company reported an underlying EBITDA loss of $0.1 million, down from a positive $1.5 million in the prior corresponding period. Excluding the Precious Cargo centres, underlying centre EBITDA also declined by 9.7% to $4.3 million, reflecting broader softness in the childcare market and integration hurdles.

Significant Goodwill Impairment Hits Statutory Results

Mayfield’s statutory net profit after tax (NPAT) showed a loss of $21.9 million, a sharp deterioration from a $0.8 million loss in the previous year. This was heavily influenced by a non-cash goodwill impairment charge of $19.4 million. The impairment arose from revised assumptions around the value of acquired centres, particularly those from the Precious Cargo and Genius Education Holdings transactions, which have underperformed relative to earlier forecasts.

The company cited more conservative assumptions regarding cost of capital, long-term growth, fee rates, and occupancy recovery as reasons for the impairment. This accounting adjustment underscores the challenges Mayfield faces in realising the full value of its acquisitions amid a tough operating environment.

Occupancy and Operational Initiatives

Occupancy remains a critical concern, with group-wide occupancy at 53%, down 7 percentage points from the prior year. The Precious Cargo centres reported an even lower occupancy rate of 44%, highlighting integration and market challenges. Despite this, Mayfield’s management has implemented a series of operational initiatives since the appointment of CEO Daniel Stone in March 2025, focusing on cost control, workforce efficiency, and centre-level performance improvements.

These efforts have yielded some positive momentum, with underlying centre EBITDA improving from $1.2 million in Q1 to $2.3 million in Q2, and occupancy showing early signs of recovery. The company also reported a significant reduction in agency staffing costs by approximately 78%, reflecting better roster optimisation.

Financial Position and Outlook

Mayfield maintains a favourable working capital position, with $0.4 million in cash on hand and $6.4 million available under its working capital facility. The company successfully extended its Westpac debt facility to August 2026, albeit with a modest 0.75% increase in the funding rate.

Looking ahead, the board refrained from providing quantitative earnings guidance for FY25, citing ongoing uncertainties related to occupancy recovery and integration progress. Management remains focused on driving occupancy gains, completing integration of acquisitions, and improving operational efficiencies to return to sustainable profitability in FY26 and beyond.

CEO’s Perspective

CEO Daniel Stone acknowledged the disappointing headline results but expressed cautious optimism about the future. He emphasised the company’s commitment to professional excellence, operational execution, and financial discipline. Stone highlighted ongoing efforts to build a high-performance childcare business that delivers quality care and value to families, while maintaining transparency and trust with stakeholders.