G8 Education 2025 slides: occupancy crisis overshadows quality gains

G8 Education Limited (ASX:GEM), Australia's early childhood education provider, presented its full year 2025 results on February 22, 2026, revealing a company caught between operational excellence and severe market headwinds as plummeting occupancy rates overshadowed improvements in service quality and team retention. The company's stock fell 13.04% to $0.46 following the presentation, reflecting investor concerns over the occupancy crisis despite notable achievements in educational quality. Financially, G8 reported operating revenue of $946.9 million, representing 7.0% growth, while operating EBIT reached $93.3 million with a 9.9% margin. However, the company posted a statutory net loss after tax of $303.3 million, primarily due to a $350 million goodwill impairment charge reflecting deteriorated market conditions. Despite these challenges, G8 maintained strong operating cash flow at $168 million after interest and tax, declared a reduced dividend of 2 cents per share, and executed a share buyback of 38.4 million shares totaling $42.6 million. The occupancy crisis emerged as the most critical challenge facing G8, with group occupancy falling from 70.7% in 2024 to 65.8% in 2025, and current spot occupancy standing at just 54.4%. Western Australia and Victoria experienced the most severe pressures, with year-to-date occupancy declining 7.8 percentage points compared to the prior year. The company attributed this decline to economic headwinds that softened enquiry levels, with affordability pressures and confidence issues constraining families' ability to commit to permanent days. Despite these operational challenges, G8 demonstrated significant improvements in quality metrics, achieving a Net Promoter Score of 53 (up 3 points) and maintaining 95% of centers meeting or exceeding the National Quality Standard, 4 percentage points above the sector average. Team retention also improved to 79%, with Center Manager retention reaching 86% and Early Childhood Teacher retention at 78%. In response to market challenges, G8 implemented strategic measures including divesting 5 centers, surrendering or allowing 6 leases to expire, and opening zero new centers during the year. The company's environmental, social, and governance initiatives showed progress with a dedicated Safety Committee established, inaugural climate disclosure report published, and emissions reduced by 9.4%. Solar installations generated over 1.1 million kWh of power, equivalent to offsetting 758 tonnes of CO2-e. Looking ahead, G8's strategic framework focuses on safety, team development, and quality education, with management acknowledging that earnings remain affected by the operating environment. Current trading conditions continue to challenge the company, with spot occupancy of 54.4% as of February 15, 2026, suggesting persistent pressure in the near term despite the company's operational improvements and quality achievements.