G8 Education Maintains EBIT Guidance Despite $350M Impairment

Goodwill Impairment Signals Sector Strain

G8 Education Limited (ASX, GEM), a major player in early childhood education, has revealed it expects to record a non-cash goodwill impairment of approximately $350 million in its full year FY25 financial results. This sizeable write-down reflects the challenging operating environment the company faces, including subdued occupancy rates, rising regulatory and compliance costs, and increasing wages.

Despite the impairment, G8 Education has confirmed that its previously announced EBIT guidance of $91 million to $98 million (lease adjusted) remains intact. The company also reassured investors that this accounting adjustment will not impact its financial covenants with lenders, signalling a degree of financial resilience amid sector headwinds.

Dividend and Buyback Suspensions Reflect Caution

In a move that underscores the cautious tone of the update, the Board has decided to withhold the final dividend for 2025. Additionally, the on-market share buyback program, which was announced in August 2025, will be paused until there is greater clarity around occupancy trends and broader sector conditions. These decisions highlight the company’s focus on preserving cash and maintaining financial flexibility in an uncertain environment.

The impairment assessment took into account a range of factors including current occupancy levels as of early February 2026, anticipated supply and demand dynamics, expected fee increases tempered by cost of living pressures, and projected rises in wages and operating costs. The final impairment figure remains subject to confirmation by external auditors and approval by the Board.

Navigating a Challenging Landscape

G8 Education’s leadership remains confident in the company’s strategic direction and core operations. The Board and management emphasised their commitment to priorities such as safety and compliance, enhancing family experience, delivering quality education, boosting occupancy, and ensuring financial sustainability. However, the update candidly acknowledges that sector conditions continue to be challenging, with ongoing uncertainties likely to influence near-term performance.

Investors will be watching closely for the company’s full year results announcement scheduled for 23 February 2026, which will provide further detail on the impairment and operational outlook. Meanwhile, the suspension of dividends and buybacks may weigh on investor sentiment, even as the company navigates these headwinds with a measured approach.