Why is this ASX All Ords stock crashing 14% today?

This company is paying someone to take some assets off its hands.

| More on:
A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The G8 Education Ltd (ASX: GEM) share price is having a very disappointing session.

At one stage today, the ASX All Ords stock was down 14% to 94.2 cents.

The childcare operator's shares have recovered a touch since then but remain down almost 11% at the time of writing.

Why is this ASX All Ords stock sinking?

Investors have been selling G8 Education's shares on Thursday after the company released a trading update and announced the sale of some assets.

In respect to the latter, the company has signed a conditional agreement to sell 31 of its centres to TAK Operations, which is part of the experienced private national childcare provider Genius Education Group.

However, unlike a normal sale, G8 Education is paying TAK Operations to take the assets off its hands.

Under the terms of the agreement, the ASX All Ords stock will make a payment to Genius Education Group, to be allocated across the 31 centres, which combined with transaction costs and adjustments, totals $26.5 million.

This appears to be a sign that management isn't confident that it can turn around the fortunes of these businesses, which are collectively producing a full-year statutory EBIT loss of ~$3 million.

The transaction remains subject to conditions, including landlord consent, transfer of the service approval, and the concurrent completion of certain bundles of centres.

Management notes that obtaining landlord consent to the assignment of each lease from the multiple landlords is not guaranteed and there remains uncertainty regarding completion of all 31 centres proposed to be divested.

Commenting on the sale, G8 CEO and Managing Director, Pejman Okhovat, said:

As part of G8's commitment to optimising our network we continuously review our centres to determine which are meeting our high quality and performance standards, which can be improved and which centres would be better under different ownership. This agreement represents a significant milestone in our portfolio optimisation program and will leave us with a stronger network overall.

A key consideration for G8 was a commitment from Genius Education Group to provide opportunities to our people who will transfer to the new owners. While there is some way to go in the process, we have every confidence that Genius Education Group will provide the ongoing high level of service that the children, families and our team at these centres expect and deserve.

Trading update

The ASX All Ords stock also released a trading update.

It advised that spot occupancy for the week ending 22 October 2023 was 75.4%, 1.4 percentage points below the same week in 2022 and 2.2 percentage points below the same week in 2019.

Cost management continues to be solid and managed to mitigate occupancy performance. The divestment will have no impact on trading in calendar year 2023 given settlement is no earlier than mid-December.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Real Estate Shares

senior couple disappointed and sad at their financial situation
Share Fallers

Down 26% in 5 days, why is this ASX 200 real estate stock crashing again today?

Investors are displeased with the latest announcement from the ASX 200 real estate stock.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Real Estate Shares

Why this ASX 200 real estate share is plunging 17% today

The ASX 200 real estate share is taking a beating on Monday. But why?

Read more »

Three smiling corporate people examine a model of a new building complex.
Real Estate Shares

Bell Potter names the best ASX real estate shares to buy in FY25

There could be 'significant value' on offer in the sector right now.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Real Estate Shares

ASX 200 stock rallies as monopoly remains intact

This company is turning out to hold a monopoly that's too hard for government to crack.

Read more »

Real estate agent and client exploring property.
Real Estate Shares

Are ASX real estate shares building towards a better FY25?

Here’s the outlook for the ASX real estate sector.

Read more »

Three smiling corporate people examine a model of a new building complex.
Real Estate Shares

3 ASX 300 real estate shares with attractive dividend yields

It's dividend day for these three property players.

Read more »

Woman with a moving box on her head.

1 ASX small-cap stock that could benefit from the rental crisis

Noticed the rental market shortage? This may be an opportunity for this ASX small-cap share.

Read more »

An industrial warehouse manager sits at a desk in a warehouse looking at his computer while the Centuria Industrial share price rises
Real Estate Shares

Guess which ASX 200 co-founder just sold $33 million worth of company shares

A major sale has just occurred at one of the ASX’s market darlings.

Read more »