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Why the G8 Education share price rocketed 13% higher today

The G8 Education Ltd (ASX: GEM) share price has been a very strong performer on the S&P/ASX 200 Index (ASX: XJO) on Tuesday.

In morning trade the childcare centre operator’s shares are up 13% to 79 cents.

Why is the G8 Education share price surging higher?

This morning G8 Education released an update on the Federal Government’s wage subsidy package and its upcoming dividend.

The company notes that in response to the COVID‐19 pandemic, the Federal Government has announced a comprehensive wage subsidy program. This package will see eligible businesses receive wage subsidies of $1,500 per eligible employee per fortnight via a JobKeeper payment.

This will be a big boost to G8 Education and provides it with some much-needed support over the next six months.

In addition to this, G8 Education notes that the government recognises early childhood education and care as an essential service. As such, it has indicated that further announcements will be made regarding funding for the sector. This includes in relation to the Child Care Subsidy.

G8 Education’s Chief Executive Officer and Managing Director, Gary Carroll, was pleased with the government’s announcement.

He commented: “During these unprecedented times, the Federal Government has reinforced its commitment to assisting Australian families, early childhood education and care providers and workers. We continue to work closely with the government on further support measures for the sector and Australian families who rely on our services.”

Dividend update.

When G8 Education released its full year results in February, it declared a fully franked final 6 cents per share dividend. This dividend was due to be paid next week on April 6.

However, given the rapidly evolving environment in relation to COVID‐19, the G8 Education board has decided to postpone the payment until October.

As part of its cash management planning, the board considers this a prudent step to maintaining liquidity and protecting long‐term shareholder value.

The company notes that it has $135 million in cash and available facilities and maintains covenant headroom. It also has strong and supportive relationships with its lenders.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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