One of the worst performers on the market on Monday has been the G8 Education Ltd (ASX: GEM) share price.
The childcare centre operator's shares are down 20% to $3.51 in early trade following the release of a disappointing trading update.
What happened?
This morning the company downgraded its FY 2017 underlying earnings before interest and tax growth guidance to just 5% year-on-year to approximately $160 million.
This compares to its prior guidance of "mid-$170 million" given at the end of August.
According to the release, the downgrade has been made due to a recent slowing of occupancy growth. Like for like occupancy for FY 2017 is now forecast to be around 77%, versus 79.7% in FY 2016.
Management has blamed this on supply issues in areas including Western Sydney, Gold Coast, East Brisbane and Inner Melbourne, combined with sluggish wage growth and employment conditions in regions such as North Queensland.
The Think Childcare Ltd (ASX: TNK) share price has also been dragged lower by the news today.
What now?
Considering its strong first-half and the positive outlook it gave for the remainder of FY 2017, today's downgrade is nothing short of a disaster and I can't say I'm surprised to see its shares sink lower.
While it is tempting to wait for a rebound, with its shares now about flat this year, investors may want to consider selling up and moving onto something more reliable.
