Sluggish wages growth and the federal government's cap on benefits have led to fewer children going to childcare centres, says G8 Education.
The Gold Coast-based childcare centre operator says supply of long-day care centres across the country has exceeded demand in the past year.
The group's like-for-like centres, which strips out newly acquired venues, suffered a $10.3 million fall in revenue in the six months to June 30 compared to a year ago.
But savings in its own wages bill and contributions from the centres it acquired in 2016 has helped it lift profit 23 per cent to $30.5 million.
Revenue was up three per cent at $368 million.
"From a market perspective, affordability has been impacted by continued sluggish wage growth as well as current industry settings such as the $7,500 rebate cap," G8's half-year results presentation slide said.
"This is expected to be mitigated by the jobs for families package in July 2018."
G8 said the supply of long-day care rose 3.7 per cent but estimated demand had lifted only two to 2.5 per cent.
That increased supply, including in inner Sydney and Canberra, and economic weakness in WA and north Queensland contributed to a 3.4 per cent fall in its rolling 12-month occupancy, it said.
However, G8 said occupancy momentum had been improving in the second quarter compared to the same time a year ago.
G8 maintained its forecast of mid-$170 million full-year underlying earnings before interest and tax, and said it plans to complete eight acquisitions in the second half with earnings from acquisitions estimated to add $3 million to its results.
Shares in G8 Education were up 8.3 per cent, or 31 cents, to $4.04 by 1429 AEST.
G8 EDUCATION'S HALF-YEAR RESULTS:
* Profit up 23pct to $30.5m
* Revenue up 3pct to $368m
* Interim dividend unchanged at 12 cents a share, fully franked
